FAILURE to convert the Independent Power Tanzania Limited (IPTL) power plant engines from using heavy oils to natural gas is costing the Tanzania Electric Supply Company (Tanesco) and the government in general 11 million US dollars (about 22bn/-) per month.
This was said by the International
Independent Consultant with VIP Engineering and Marketing Limited, Mr
James Rugemalira, when giving evidence in the 1 trillion/- suit in which
the local investment company is suing Standard Chartered Bank and five
other defendants for fraud in IPTL.
He told Judge Salvatory Bongole at the
High Court in Dar es Salaam last week that such burden to Tanesco and
the government was revealed by provisional liquidator of IPTL, who had
been appointed by the court to investigate claims of VIP Company against
Mechmar Corporation (Malaysia) Berhad. “At this time and even today,
the Tegeta IPTL power plant has not been converted to use gas for
delivering 100MW power.
IPTL is still using heavy fuel. You can
imagine how VIP is feeling,” Mr Rugemalira testified during examination
in chief led by American lawyer, Mr Chris Provenzano. The prominent
local businessman narrated that VIP Company sold its 30 per cent shares
in IPTL finally on January 23, 2014 to Pan Africa Power Solutions
Tanzania Limited (PAP), but reserved its rights for claims of past
damages and losses caused from IPTL and VIP by the defendants.
He testified that after agreeing with
PAP in a sale contract signed on August 19, 2013, VIP gave notice to all
defendants and also advertised in several newspapers of its intention
to withdraw the petition for winding up of IPTL and also gave notice of
the consequential orders it would seek from the court.
One of the conditions in the public
interest for withdrawing the petition and sell the shares to PAP, he
explained, was that PAP would expand the power plant from 100MW to 500MW
and reduce tariffs to Tanesco between 6 US cents per KwH to 8 US cents
per Kwh and IPTL convert its engines to be able to be fired by natural
gas.
“Not all benefits are monetary. VIP was
very satisfied in ensuring that among other things power would be
affordable and that would repair its public image that the contract it
had signed with the government on behalf of IPTL really produce the
cheapest power in the country as had been intended from the beginning,”
he testified.
According to him, VIP Company offered to
withdraw its claim against Wartsila Nederland BV under condition that
it would assist PAP to expand the IPTL power plant and to convert the
engines into gas firing, but Wartsila rejected the offer.
“In its letter, Wartsila answer was that
VIP does no longer has interest in IPTL and therefore it has no right
to request them to convert the power plant as that is a commercial
matter that will be dealt with by Wartsila and PAP,” the businessman
told the court.
Under the Power Purchase Agreement of
which Mr Rugemalira was the one he had negotiated for IPTL with Tanesco
and the government in general, it was contemplated in two phases of
construction of the power plant that was undertaken by Wartsila group of
companies.
The first phase was initially short time
one to use heavy fuel oils and that after gas became available at Songo
Songo the engines were to be converted into natural gas. Tanesco and
IPTL adopted such two phases because at that time gas was not available.
Mr Rugemalira told the court, therefore,
that since there was terrible shortage of power at the time, the
government and Tanesco wanted to start getting power as soon as
possible.
Hearing of the case has been adjourned
to April 19. The defendants in the suit are Standard Chartered Bank,
Standard Chartered Bank (Hong Kong) Limited and Standard Chartered Bank
(Tanzania) Limited.
Other defendants include Joint
liquidators of Mechmar Corporation (Malaysia) Berhad, Wartsila Nederland
BV and Wartsila Tanzania Limited.
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