US firm demands Sh53bn from Tanzania power supplier Tanesco for breach of contract
US-based Symbion Power has taken Tanzania Electric Supply Company (Tanesco) to the International Court of Arbitration in Paris seeking $561 million settlement (KSh53.7 billion) for breach of contract.
According to Symbion spokeswoman Julie Foster, the firm filed an application for arbitration at the court on Monday after efforts to resolve the dispute about the validity of the 15-year Power Purchase Agreement (PPA) in a friendly manner for more than a whole year failed. “We ran out of options.”
“One month ago, we wrote to Tanesco to give them a notice that we had no choice other than to terminate the contract. The notice period expired on March 3, but Tanesco has not replied. They just continued to ignore Symbion.
"We waited for another week and still heard nothing before we eventually and reluctantly resorted to the international court on March 13. The Power Purchase Agreement is now terminated and the amount claimed is $561 million,” said Ms Foster in a statement made available to The Citizen.
The disputed PPA was signed in December 2015, handing the US firm a long-term contract to supply Tanesco with 112 MW through firm’s Ubungo gas-powered generators until December 2030.
However, on January 26, 2016 Tanesco wrote to Symbion, saying the PPA was put on hold. Former Tanesco managing director Felchesmi Mramba indicated earlier last year that government had directed that it “put on hold” its relation with Symbion and later said he wasn’t ready to discuss the matter with media.
“We can’t have such a large 120MW power plant lying idle whilst Tanzania is short of power. Symbion operated the power plant for six years and had always been owed huge amounts of money by Tanesco. The Symbion Power Plant had provided the lowest cost electricity in Tanzania, so it is a great shame that we have been so unnecessarily forced in to this position by Tanesco,” said Ms Foster.
“For Symbion this is a very sad time and we get no satisfaction at all from it. As everyone knows, we are huge supporters of Tanzania and despite this dispute with the power utility Tanesco, we will always wish Tanzania and its government well.”
Ordered to pay
As Symbion opted to the international tribunal, last September, the International Centre for Settlement of Investment Disputes (ICSID) ordered Tanesco to pay $148.8 million to Standard Chartered Bank-Hong Kong over the tussle on ownership of controversial Independent Tanzania Power Limited (IPTL).
Tanesco’s problems began after the government, in September 2013, controversially paid over Sh440 billion ($200 million) to Pan African Power Solutions Tanzania Limited (PAP) owned by Harbinder Sethi after he claimed he had acquired IPTL.
The funds were withdrawn from the Tegeta escrow account that was opened at the Bank of Tanzania 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.
By Athuman Mtulya