Agama_Agama
Senior Member
- Sep 13, 2016
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Pressure piles on Tanesco
Troubled state power company faces yet another international litigation two weeks after it was ordered to pay $148.8 million Standard Chartered Bank (HK)
WHY TANESCO WANTS OUT: In deciding to cut ties with Symbion, Tanesco reportedly cited court cases facing the US power firm as the reason it wanted out of a 15-year contract. One of the cases involves a ruling by the High Court granting the confiscation of the Symbion power plant at Ubungo in Dar es Salaam over a Sh6.372 billion debt.
Dar es Salaam. A US firm, Symbion Power, has threatened to drag troubled state power utility Tanesco to another international arbitration tribunal for neglecting contractual obligations.
Symbion managers have already issued similar warnings to Tanesco after it decided to stop buying their power from the Ubungo plant in Dar es Salaam.
Tanesco also faces international litigation for allegedly failing to timely settle its accumulated power bills with the independent energy producer.
“The situation in Tanzania remains in limbo,” Symbion chief executive Paul Hinks told African Energy recently.
“We are not delivering power right now, but we are being drip-fed with payments for invoices for the power we supplied back in 2014. So far we have not been paid for any of the power we delivered in 2015 and 2016 prior to the plant being shut down,” he said.
Mr Hinks did not reveal how much his firm was owed by the State power utility but in an email to The Citizen yesterday he noted that the Tanesco debt was accumulating every month because of the small amounts they were being paid.
Fresh pressure from the US firm comes two weeks after a World Bank affiliated triburnal, the International Centre for Settlement of Investment Disputes (ICSID), ruled against Tanesco in a multi-million dollar power deal tussle involving Standard Chartered Bank-Hong Kong (SCB-HK) and the controversial Independent Tanzania Power Limited (IPTL), whose ownership businessman Harbinder Singh Sethi claimed.
Tanesco’s problems began after the government, back in September 2013, controversially paid over Sh440 billion ($200 million) to Pan African Power Solutions Tanzania Limited (PAP) owned by Mr Sethi after he claimed he had acquired IPTL.
The funds were withdrawn from the Tegeta escrow account that was opened at the Central Bank after Tanesco opened a suit at ICSID claiming it was being overcharged by IPTL. Both agreed to have payments directed to the account until the matter was resolved.
However, before any ruling was made, the controversial payments to PAP were made. That didn’t augur well with the SCB-HK which took over IPTL in 2008 after the company failed to pay loans it acquired in 1998 to finance the construction of power plants.
In its latest ruling a fortnight ago, the World Bank affiliated triburnal did Tanesco a major blow after it awarded damages amounting to $148.4 million (Sh320 billion) to Standard Chartered Bank (Hong Kong) .
The State power is still contemplating its next move, but has suggested it could consider appealing the ICSID ruling, a culmination of a lengthy arbitration process that began in 2010. Tanesco alleges “legal flaws” in the process.
And now Tanesco may have to deal with two major issues that threatens to damage the government’s reputation in its dealings with foreign investors.
The African Energy magazine, in its issue No. 331, quoted a Symbion top official suggesting that the US firm could seek the intervention of international arbitrators in its bid to recover its claims in case Tanesco continues to “neglect” its contractual obligations.
In emailed comments to African Energy, Mr Hinks questioned why Tanesco continues to buy expensive power from IPTL and not from their Ubungo plant.
“They are dispatching the IPTL heavy fuel oil (HFO) plant and buying the fuel to run it. So a low-cost natural gas powered plant is idle while they utilise a more costly imported, oil-fired plant instead. Only Tanesco can answer why they are doing this – the rest of us can only speculate,” he is quoted as saying.
Mr Hinks told African Energy that Although Symbion remained in communication with the government, it was not clear that arbitration can be avoided.
“The acrimony that was evident at the onset of the dispute has abated and we are in touch with Tanesco and the government. It remains to be seen, however, whether or not Tanesco will resolve matters and thereby avoid a lengthy and expensive ICC (International Chamber of Commerce) arbitration,” he noted.
However, Tanesco managing director Felchesmi Mramba declined to comment yesterday saying they were yet to receive official complaints from Symbion.
“I cannot comment on any of the issues you are asking me because we (Tanesco) have not received any official communication from Symbion. We will be in a position to say something after receiving communication on their concerns,” he said in a telephone interview with The Citizen on Saturday.
Tanesco’s deal with the US firm in 2011 looked promising. It came amid chronic energy shortages, and soon after the state-run power company announced daily 16-hour power cuts for a week up mid May because of a shortfall of up to 350 megawatts (MW) on the national grid due to maintenance work.
The country had been plagued by frequent power outages since December, 2010. Symbion Power acquired a thermal power plant that was previously owned by Dowans Tanzania Limited, and had a generation capacity of 112 megawatts.
Early this year, President John Magufuli directed Tanesco to cut ties with independent power producers amid concerns over the high costs of buying power from them. Symbion Power accuses Tanesco of failing to pay for power supplied by its Ubungo plant, which has remained idle for several months now.
The US firm resumed operations at the 120MW plant in October 2015 after a year out of service because of gas shortages. After its power purchase agreement (PPA) expired in September 2015, the company says it signed a new 15-year PPA with Tanesco last December.
Troubled state power company faces yet another international litigation two weeks after it was ordered to pay $148.8 million Standard Chartered Bank (HK)
WHY TANESCO WANTS OUT: In deciding to cut ties with Symbion, Tanesco reportedly cited court cases facing the US power firm as the reason it wanted out of a 15-year contract. One of the cases involves a ruling by the High Court granting the confiscation of the Symbion power plant at Ubungo in Dar es Salaam over a Sh6.372 billion debt.
Dar es Salaam. A US firm, Symbion Power, has threatened to drag troubled state power utility Tanesco to another international arbitration tribunal for neglecting contractual obligations.
Symbion managers have already issued similar warnings to Tanesco after it decided to stop buying their power from the Ubungo plant in Dar es Salaam.
Tanesco also faces international litigation for allegedly failing to timely settle its accumulated power bills with the independent energy producer.
“The situation in Tanzania remains in limbo,” Symbion chief executive Paul Hinks told African Energy recently.
“We are not delivering power right now, but we are being drip-fed with payments for invoices for the power we supplied back in 2014. So far we have not been paid for any of the power we delivered in 2015 and 2016 prior to the plant being shut down,” he said.
Mr Hinks did not reveal how much his firm was owed by the State power utility but in an email to The Citizen yesterday he noted that the Tanesco debt was accumulating every month because of the small amounts they were being paid.
Fresh pressure from the US firm comes two weeks after a World Bank affiliated triburnal, the International Centre for Settlement of Investment Disputes (ICSID), ruled against Tanesco in a multi-million dollar power deal tussle involving Standard Chartered Bank-Hong Kong (SCB-HK) and the controversial Independent Tanzania Power Limited (IPTL), whose ownership businessman Harbinder Singh Sethi claimed.
Tanesco’s problems began after the government, back in September 2013, controversially paid over Sh440 billion ($200 million) to Pan African Power Solutions Tanzania Limited (PAP) owned by Mr Sethi after he claimed he had acquired IPTL.
The funds were withdrawn from the Tegeta escrow account that was opened at the Central Bank after Tanesco opened a suit at ICSID claiming it was being overcharged by IPTL. Both agreed to have payments directed to the account until the matter was resolved.
However, before any ruling was made, the controversial payments to PAP were made. That didn’t augur well with the SCB-HK which took over IPTL in 2008 after the company failed to pay loans it acquired in 1998 to finance the construction of power plants.
In its latest ruling a fortnight ago, the World Bank affiliated triburnal did Tanesco a major blow after it awarded damages amounting to $148.4 million (Sh320 billion) to Standard Chartered Bank (Hong Kong) .
The State power is still contemplating its next move, but has suggested it could consider appealing the ICSID ruling, a culmination of a lengthy arbitration process that began in 2010. Tanesco alleges “legal flaws” in the process.
And now Tanesco may have to deal with two major issues that threatens to damage the government’s reputation in its dealings with foreign investors.
The African Energy magazine, in its issue No. 331, quoted a Symbion top official suggesting that the US firm could seek the intervention of international arbitrators in its bid to recover its claims in case Tanesco continues to “neglect” its contractual obligations.
In emailed comments to African Energy, Mr Hinks questioned why Tanesco continues to buy expensive power from IPTL and not from their Ubungo plant.
“They are dispatching the IPTL heavy fuel oil (HFO) plant and buying the fuel to run it. So a low-cost natural gas powered plant is idle while they utilise a more costly imported, oil-fired plant instead. Only Tanesco can answer why they are doing this – the rest of us can only speculate,” he is quoted as saying.
Mr Hinks told African Energy that Although Symbion remained in communication with the government, it was not clear that arbitration can be avoided.
“The acrimony that was evident at the onset of the dispute has abated and we are in touch with Tanesco and the government. It remains to be seen, however, whether or not Tanesco will resolve matters and thereby avoid a lengthy and expensive ICC (International Chamber of Commerce) arbitration,” he noted.
However, Tanesco managing director Felchesmi Mramba declined to comment yesterday saying they were yet to receive official complaints from Symbion.
“I cannot comment on any of the issues you are asking me because we (Tanesco) have not received any official communication from Symbion. We will be in a position to say something after receiving communication on their concerns,” he said in a telephone interview with The Citizen on Saturday.
Tanesco’s deal with the US firm in 2011 looked promising. It came amid chronic energy shortages, and soon after the state-run power company announced daily 16-hour power cuts for a week up mid May because of a shortfall of up to 350 megawatts (MW) on the national grid due to maintenance work.
The country had been plagued by frequent power outages since December, 2010. Symbion Power acquired a thermal power plant that was previously owned by Dowans Tanzania Limited, and had a generation capacity of 112 megawatts.
Early this year, President John Magufuli directed Tanesco to cut ties with independent power producers amid concerns over the high costs of buying power from them. Symbion Power accuses Tanesco of failing to pay for power supplied by its Ubungo plant, which has remained idle for several months now.
The US firm resumed operations at the 120MW plant in October 2015 after a year out of service because of gas shortages. After its power purchase agreement (PPA) expired in September 2015, the company says it signed a new 15-year PPA with Tanesco last December.
