Tanzania and Malaysian company bring dispute to a centre for arbitration

May 03, 1999 02:00 AM

Tanzania and a Malaysian-backed company have brought their long-standing dispute to a Washington-based centre for arbitration.
The dispute since last year has been centred on the building cost of a 100 MW thermal power plant constructed by the company in Dar Es Salaam, capital of Tanzania.
The non-tribunal arbitrator, the International Centre for Settlement of Investment Disputes, a member of the World Bank group, will start hearing the dispute next month, said Patrick Rutabanzibwa, permanent secretary in the Tanzanian Ministry of Energy and Minerals,

Independent Power Tanzania (IPTL), the Malaysian company, has claimed that it has invested $ 150 mm in the power plant, while the state-owned Tanzanian Electric Supply Company (TANESCO) maintains that the project is only worth $ 90 mm.
On the basis of this divergence, the IPTL intends to sell the electricity generated from the plant at 21 $ cents per kWh, while the government wants the price to be set at 9 $ cents.
The IMF and the World Bank had been against the project, saying that a 21-$ cent power tariff would be an unacceptable burden on Tanzania's fragile economy.
The Tanzanian government, however, awarded the multi-million-dollar contract to IPTL in 1994 as an emergency means to solve a power crisis.
Malaysian investors have 70 % of shares in the project while Tanzania has a 30 % stake. Construction of the power plant in the northern outskirts of Dar Es Salaam was completed last September but no electricity has been produced due to the dispute.
Earlier, IPTL filed a case with Tanzania's High Court demanding TANESCO to pay it $ 3.6 mm monthly as fixed capacity power cost since September, when commercial production had been scheduled to commence.
The High Court ordered TANESCO to start paying the monthly charge early this year pending mediation on the plant's actual cost but the government responded by challenging the ruling in the Court of Appeal, which is scheduled to hear the case on May 14.
Tanzania's electricity production depends mainly on hydropower stations and the east African country often experienced power outages during dry seasons.

Source: Xinhua via Newspage
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