This Day
Independent Power Tanzania Limited (IPTL), which has long been tangled in a complex web of corruption and legal manoeuvring, has now been thrown back into the spotlight as the government desperately seeks a solution for the countrys latest and ongoing power crisis.
The power plant based in Tegeta on the outskirts of Dar es Salaam has an installed capacity of 100 megawatts, and could immediately end the ongoing rolling blackouts if its thermal-powered turbines are switched on.
Tanzanias national grid currently has an 80-megawatt (MW) power shortfall, a situation that now appears to have forced the government to turn to the highly controversial IPTL project as a stop-gap measure to end the crippling load shedding.
According to a statement issued by State House on Wednesday night, President Jakaya Kikwete has instructed government officials to work towards buying power from the privately-owned IPTL power plant, which is presently lying idle.
This is notwithstanding the fact that IPTL, a joint venture project between Malaysian investors and a local company, is currently involved in protracted legal disputes on two different fronts - both externally and internally.
On one hand, the company has unresolved legal issues with the state-run Tanzania Electric Supply Company (TANESCO) regarding payment of capacity charges; and on the other hand, the firm is also embroiled in a long-running dispute between its shareholders.
The High Court in Dar es Salaam recently put IPTL under receivership following a successful application by its local shareholder, VIP Engineering and Marketing of Tanzania (VIPEM), which owns a 30 per cent stake in the power company.
VIP Engineering is owned by prominent Dar es Salaam-based businessman James Rugemalira.
Mechmar Corporation of Malaysia, with a 70 per cent stake, is the majority shareholder in IPTL and is challenging the planned liquidation of the joint venture company.
But despite being involved in a court case to wind up its operations, IPTL is still in a position to provide a short-term fix to the current national power crisis, according to State House.
President Kikwete has already directed the ministries of energy and minerals, finance and economic affairs, and justice and constitutional affairs, to ensure that this plan is implemented immediately and IPTL power is injected into the national power grid as soon as possible.
And according to Energy and Minerals Minister William Ngeleja who yesterday made an impromptu tour of the virtually-deserted IPTL Tegeta plant, this could be within a few weeks time - latest end-November.
As the government now turns to IPTL as the anointed saviour of the nations power woes, here is a synopsis of how the dubious project was hatched, resisted, and eventually commissioned under a cloud of apparent corruption and major bribery:
The origins of IPTL can be traced way back to 1992, when Tanzania started to experience extensive power rationing caused by a period of prolonged drought.
In 1994, drought led to power shortages as TANESCOs hydro catchment areas ran dry. The state power utility then invited private investor companies to provide emergency solutions.
Seizing this opportunity, IPTL was formed in the same year (1994) as a joint venture project between Malaysian and Tanzanian investors.
In May/June 1995, IPTL signed a 20-year power purchasing agreement (PPA) with the government to build and run a 100MW, slow-speed diesel (SSD) power plant at a cost of $163.5 million.
The project, involving as it did Malaysian and Tanzanian investors working together, was initially hailed as a model for South-South cooperation. But widespread allegations of grand corruption and bribery soon surfaced over how the project was finally approved to go ahead.
The founder president, Mwalimu Julius Nyerere, was once quoted as saying about IPTL: If this is South-South co-operation, then colonialism is preferable.
A damning report by the local chapter of Transparency International described the IPTL project as a Malaysian investment that may bleed Tanzania of hundreds of millions of dollars in bloated payments for electricity that the country neither needs nor can afford...
The widely-circulated Transparency International report gives explicit details on how bribes were allegedly paid to senior government officials to approve the IPTL project.
The report says the then permanent secretary in the Ministry of Energy and Minerals, Patrick Rutabanzibwa, fiercely opposed the IPTL project for its obvious flaws, but was overruled by higher level government officials.
Rutabanzibwa, a veteran senior civil servant, is now PS in the Ministry of Lands and Human Settlements Development.
The Prevention and Combating of Corruption Bureau (PCCB) is said to have at one point launched an investigation into the corruption allegations surrounding the IPTL deal. But it remains unclear why no criminal charges were ever filed against known suspects.
It emerged that between February 1995 and January 1996, IPTL negotiated with Watsila manufacturer of diesel and gas power turbines, to build and install a cheaper, medium-speed diesel (MSD) plant at the Tegeta site.
In November 1998, TANESCO sought arbitration at the International Centre for the Settlement of Investment Disputes (ICSID), after IPTL failed to justify the projects cost structure and payments, which were used to determine the monthly capacity charges and power tariffs.
The London-based ICSID ruled in February 2001 that IPTL was overpriced by $23.5 million, but also that the contract still stands apparently because TANESCO was aware of the switch from SSD to MSD power turbines.
TANESCO later discovered that IPTLs equity in the multi-million dollar project had always been just 50,000/- (fifty thousand Tanzanian shillings only), and was never increased to $38.16 million (approx. 50bn/-) as agreed by the two parties.
In the first four years of operation, TANESCO paid IPTL a staggering 159.5bn/- in capacity charges alone. On top of this, TANESCO also paid IPTL billions of shillings for its unusually high power tariffs.
While TANESCO sells power to its customers for around 80/- per kilowatt hour (kw/h), the power utility paid IPTL 150.23/- per kw/h.
There have been various attempts by the government to convert IPTLs power turbines from diesel to natural gas, while moves for the state to buy the power plant outright have also been muted in the past.
It remains to be seen how the government can get around the complex legal wrangles surrounding IPTL, and eventually put its currently-idle 100MW capacity to effective use in ending the latest power crisis to hit Tanzania as a whole.