The East African (Nairobi) January 30, 2007 Posted to the web January 30, 2007 Wilfred Edwin, Special Correspondent Nairobi The concenssioning of the ill-fated Tanzania Railways Corporation (TRC) hangs in balance two months before the signing of the agreement between the government and Rites Consortium of India to operate the largest utility in the country. It has emerged here that one of the members in the consortium is facing immediate receivership by the two international banks that are now moving the High Court of Tanzania. The move will be another stumbling block in the concession of the 2,715 km line that serves an important link between the Dar es Salaam port and the landlocked countries of Rwanda, Burundi and Uganda. Mauritius-based company Gulf Africa Petroleum Company (Gapco), subsidiary Gapco Tanzania Ltd, that teamed up with Rites Ltd of India for 51 per cent share ownership in the operation of TRC, which involves rehabilitation of the line and run its for a period of 25 years. Leon Hooper, managing director of Gapco Tanzania Ltd and Gapoil Tanzania Ltd told The EastAfrican last week, "I have nothing to do with the consortium. My job is to run Gapco and Gapoil Tanzania only." GAPCO is a wholly owned subsidiary of Gapco Mauritius, a key player in the industry in East Africa. It took over the subsidiaries of Esso and Caltex in the region in the 1990s. It now has a network of 2,000 petrol stations across Uganda, Tanzania, Zambia, Malawi, Sudan, Mauritius, Kenya, Rwanda and Burundi. But last week, the leading oil firm in East Africa, valued at around $300 million, was on the defensive as it sought to counter a plea by the two international banks to the oil firm under receivership over a $43 million debt. A fortnight ago, Barclays Bank plc and Standard Chartered Bank Tanzania Ltd filed an application at the High Court of Tanzania in Dar es Salaam, seeking detention and preservation of Gapco Tanzania Ltd and Gapoil Tanzania Ltd assets charged in their favour. The banks had asked the court to grant such orders until final trial of a suit in which Gapco and Gapoil want a declaration that the formers' intention to commence receivership of their assets was premature. The applicants are seeking interim orders following an order issued on December 20, last year by Judge Laurian Kalegeya, restraining receivers appointed by Barclays Bank from taking possession of Gapco and Gapoil assets. The banks fear that if the court fails to restrain the firm, the respondents mortgaged assets could be used to pay off debts as Gapco Group of companies is in receivership in Mauritius and Uganda. It is alleged further that Gapco Uganda Ltd owes Standard Chartered Bank Uganda $4,273,156, while Gapco Mauritius owes Barclays Bank $29,760,769. But GAPCO Tanzania and Gapoil Tanzania have asked the High Court to reject the application lodged by Barclays and Standard Chartered Bank, seeking the detention and preservation of their assets. Dr Wilberd Kapinga, defence lawyer of GAPCO Tanzania Ltd told Judge Laurian Kalegeya that the submissions presented by counsel for the banks to support the application "lacked legal merits." Dr Kapinga submitted that his clients were entitled to carry on with their business after the court granted the interim order on December 20, last year, preventing receivers appointed by Barclays Bank from taking possession of the charged assets. Vinai Agarwal, the Managing Director of Rites Ltd declined to comment on the status quo of the consortium and on the ongoing legal battle between Gapco and the banks as far as its financial woes are concerned. "We would suggest that the authentic status would be better provided by the government of Tanzania," Mr Agarwal told The EastAfrican from India mid last week. As per terms of TRC concession, total infrastructure comprising track, rolling stock etc. will be handed over to the concessionaire for rehabilitation, maintenance, operation and management for a period of 25 years from the date of its takeover. In turn, concessionaire will be generating revenues through providing services and will be paying fees to the Government of Tanzania out of the income generated by it. Joseph Mapunda, acting co-ordinator of the Presidential Parastatal Sector Reform Commission (PSRC), which is currently handling the concession process of TRC, was also was non-committal on the issue. Mr Mapunda said that the consortium leaders themselves could better explain the status quo of the consortium members, as PSRC knows nothing. "So far, the further progress of the concession awaits the consortium sorting out certain issues," he said According to Rites, the total estimated capital cost of the project is $305 million over the entire concession period. This will be met through equity capital of about $ 15 million, debt of $153 million and internal accruals of $137 million. After the Tanzanian government announced on March 6, 2006 that the Indian firm's bid was the most competitive, it was scheduled that the infrastructure be handed over to the investors on September 2, 2006. This development prom pted the Union Cabinet of India later on to approve to equity investment by Rites Ltd. of a sum not exceeding $8 million, representing Rites equity participation of 51% in the strategic shareholding of the TRC. However, down the road, a hitch surfaced, as the Dar government stopped the process pending further talks with the investors. "We have put on hold the conclusion of TRC privatisation pending further talks to thrash out the finer details," the then Minister for Infrastructure Development Basil Mramba said mid last year. However, he said he was optimistic that the agreement will be signed between September and October to allow the investors to start operations, and that "signing of the agreement had taken a long time because the government wanted to protect the public interest."