IPTL was sold to benefit Dar, says ex-shareholder

Dar es Salaam. A former shareholder of the controversially sold Independent Power Tanzania Limited (IPTL) yesterday defended the use of funds held in the escrow account -- entrusted with the Bank of Tanzania -- to his 30 per cent stake saying it was done in the national interest.

Mr James Rugemalira -- whose company called VIP Engineering owned the 30 per cent share in the IPTL -- said his firm agreed to sell the said shares to Pan African Power Solutions (T) Limited (PAP) for $75 million (Sh121.275 billion).

“Actually, fellow Tanzanians should regard me as a great patriot because the deal was sealed on national interest. I deserved $600 million but I only pocketed $75 million, which is peanuts,” Mr Rugemalira told a news conference in Dar es Salaam yesterday.

He was reacting to revelations by The Citizen this week on the controversial IPTL takeover deal that involved part of the $270 million from the escrow account held with the Bank of Tanzania.

An escrow account is a financial instrument held by a third party on behalf of two others in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled.

Since the two parties, Tanzania Electric Supply Company (Tanesco) and IPTL were involved in a legal tussle in the Washington-based tribunal, it was then agreed that an escrow account be opened at the BoT—and Tanesco deposited all payments meant for IPTL pending the determination of the main civil cause in USA.

One of the key conditions for this account was that if, Tanesco won the case, it would be refunded the extra payments it had made after an appropriate calculation, agreed by both parties, as directed by Washington-based tribunal.

Yesterday, Mr Rugemalira used most of his time to explain his relationship with the previous majority shareholder in IPTL—Mechmar Corporation Malaysia (MCM).

Mr Rugemalira blamed The Citizen for what he described as being at the forefront of reporting about the flaws that emerged during the deal.

He argued that The Citizen should sympathise with him for what he called a great loss oaccassioned by the majority shareholder.

Who is the IPTL owner?

When asked by The Citizen about the ownership of IPTL, Mr Rugemalira could not specifically tell who the owners are, but only mentioned PAP, which he said had all the rights over IPTL.

“You’re asking who the IPTL owner is? That’s a very good question... I think when we get to the bottom of it you will understand the point I’m making here, the general public needs to know that after I sold my 30 per cent stakes, I signed a consent to the effect that PAP should also retain the rest of the shares,” Mr Rugemalira said.

Yesterday this paper quoted the central bank governor, Prof Benno Ndulu, as stating that the BoT released the payments after it was instructed to do so by the relevant authorities. But when asked about who was paid with the money from the escrow account, the BoT boss said: “It’s IPTL that was paid…you can contact them and you will get all the details.”

Prof Ndulu insisted that the two signatories from IPTL and Tanesco signed in order to allow the monies to be withdrawn from the escrow account.

To fund the acquisition, Mr Sethi from PAP used monies from the escrow account having purportedly settled the dispute with Tanesco in the local corridors of justice.

Background

In 1995, Tanesco and IPTL entered into a power purchase agreement (PPA) in which the latter agreed to design, construct, own, operate and maintain an electricity generating facility in Tanzania.

The original dispute in 1998 between Tanesco and IPTL was settled by an International Centre for Settlement of Investment Disputes (ICSID) tribunal in the case of Tanesco vs IPTL-ICSID Case No. ARB/98/8, which rendered an award on July 12, 2001 whereby the parties to that arbitration, had further agreed on a financial model to be applied to calculate tariffs under the PPA.

Following the award, Tanesco continued to pay capacity charges and other levies until January 2007, when it discovered that it was being overcharged by IPTL—a move that forced the state-owned power firm to file a court case.

Tanesco questioned the legality of the calculation of the capacity payments in June, 2004 and since then it has been a one step forward, but two steps back for the state power utility in its bid to fight the battle with IPTL.

As the two parties continued with the legal tussle in Washington and Dar es Salaam, it was then agreed that an escrow account be opened at the BoT—and Tanesco deposited all payments meant for IPTL pending the determination of the main civil cause in United States.