Symbion vs TANESCO: Govt admits contracts wanting; TANESCO terminates talks on new deal; Symbion to sue

All stories appearing below were cross-posted from The Citizen newspaper.

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SUNDAY, MAY 22, 2016


Dodoma. The minister for Energy and Minerals, Prof Sospeter Muhongo (pictured), has admitted that most of the power purchase and production contracts the state-owned power utility firm -- Tanesco -- entered with private firms were skewed.

He told Parliament on Friday evening that the government would from now on ensure it created competitive environment for each project whose implementation required a contractor.

“We’ve, in collaboration with the World Bank and the African Development Bank, developed a strategy for ensuring contractors are procured on merit. No company will be assigned a project without a competitive bidding,” he said when winding up his budget speech in the House.

He said the new strategy aimed at ensuring companies did not bribe officials to get contracts and that the Cabinet had already okayed the blue print. He said contracting in the energy sector would continue in line with the government’s resolve to involve other entities in its countrywide electrification bid.

Prof Muhongo cited few lopsided power purchase contracts Tanesco entered long ago to show lawmakers how they were askew.

He said the state-owned firm was paying capacity charges amounting to $4.6 million a month in a contract between it and Songas and that Symbion and Aggreko received capacity charges of $2.4 million and $2 million, respectively.

Prof Muhongo said the ministry had established a system for reviewing the performance of Tanesco officials quarterly to ensure the parastatal’s executives delivered.

“A Tanesco manager will, under this system, be assured of his post,” he said, explaining that the ministry had conducted last review towards the end of March when it dropped some officials for under performing. “We’ll conduct another review next month and in September,” he said.

Meanwhile, Prof Muhongo said a law separating oil and gas issues from the Union and Zanzibar governments though had been passed, the two sides needed to iron out some technical issues beforehand.

FRIDAY, MAY 27, 2016


Dar es Salaam. Tanzania Electric Supply Company (Tanesco) has terminated talks on a new long-term contract with Symbion Power Tanzania Ltd.

Tanesco has communicated its decision in a letter to Symbion Power, effectively ending the US-based firm’s lucrative partnership with the Tanzanian public utility. Symbion has been generating and selling power to Tanesco, in addition to building power transmission lines.

Tanesco managing director Felchesmi Mramba says in the letter dated May 4, this year, that the decision to end the talks on a power production agreement (PPA) follows a directive issued by the government.

“You will recall that Tanesco and Symbion were negotiating a long-term power purchase agreement, which would have been executed subsequent to issuance of necessary approvals from the government and other relevant authorities. Tanesco is in receipt of categorical directives from the government to suspend execution of the intended PPA on any party thereof as from the date of this letter. We wish to inform you that Tanesco has formally withdrawn from being a party to the intended PPA,” Mr Mramba says in the letter, whose copy was seen by The Citizen.

Yesterday, no Tanesco officials reached by The Citizen was willing to discuss the matter. Contacted for comment, Energy and Minerals minister Sospeter Muhongo referred us back to Tanesco. Symbion Power’s Senior Vice President for Public Affairs and Communications, Mr Adi Raval, confirmed he was aware of the development, and accused Tanesco of violating an agreement not to reveal contractual matters.

“Symbion is aware of these reports and that confidential documents have been leaked to the press. We have supplied power to Tanzania for five years without a hitch and in all these years, we have never discussed the details of our legally valid contracts involving Tanesco….the position remains the same,” Mr Raval told The Citizen yesterday from Washington. The development appears to stem from displeasure voiced recently by government leaders, including President John Magufuli, about the huge sums Tanesco pays independent power producers (IPPs).

While launching the construction of the second phase of the Kinyerezi gas-driven power plant in Dar es Salaam, President Magufuli directed Tanesco not enter into new agreements with IPPs.

He said the contracts were skewed in favour of power producers at the expense of cash-strapped Tanesco.

Presenting the Energy and Minerals ministry’s 2016/17 budget in Parliament last week, Prof Muhongo said the ministry was working towards self-reliance in power generation to end dependency on IPPs.

Symbion Power had agreements with Tanesco to operate power plants in Dar es Salaam, Dodoma and Arusha. It could not be immediately established when its current contracts run out. Tanesco currently spends at least $16.76 million ((Sh36.6 billion) per month in capacity charges paid to a handful of IPPs. Symbion alone is paid $1.866 million, $2.25 million and $2.69 million every month through selling electricity to Tanesco in Arusha, Dodoma and Dar es Salaam, respectively. Under conventional power purchase agreements, payments for capacity are made whether or not electricity is actually generated by the privately-owned power firms.

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Dar es Salaam. Symbion Power is contemplating a court move against Tanzania Electric Supply Company (Tanesco) objecting to a plan to terminate its power supply contract, The Citizen can reveal.

The Citizen has learnt that the US electricity generating and distribution company is to sue Tanesco at the International Chamber of Commerce in France over a decision to terminate their work.

This is the latest development is the fast unfolding saga that is taking the shape of the past contract wars between Tanesco and Dowans, that in the end cost the taxpayers more than Sh250 billion in dispute settlements. Dowans was awarded the huge sum in the same manner before selling off the power plant to Symbion.

Firm’s managing director Paul Hinks is reportedly mulling the action after failing to secure commitment from the government that Tanesco would not unilaterally terminate the contract it argues was legal and binding.

Symbion and Tanesco are currently in a standoff over the manner in which the local power utility corporation is handling an apparent 15-year deal it handed the US company in December last year. Highly placed sources in Tanesco confided to The Citizen that Tanesco signed an agreement with Symbion on December 10, 2015 for generating and supplying 112MW until 2030.

The contract was signed soon after the expiry of the emergency power production contract between the same parties. According to the sources, the new 15-year contract was approved by authorities, including the Energy and Water Regulatory Authority (Ewura) and the Attorney General. Ewura issued Symbion with a licence for the contract on December 7 the same year upon payment of $45,000 (Sh90 million).

According to the sources, Tanesco’s managing director Felchesmi Mramba and the company’s acting legal officer Godson Makia signed the deal on behalf of firm while those who signed on behalf of Symbion were the then managing director, Dr Wagesverom Subramaniam, and Financial controller Gosbert Mutagaywa.

Things, however, took unexpected turn last month when Tanesco wrote to Symbion to announce it was “terminating talks on a new long-term contract” with the US firm. Mr Mramba wrote the letter on May 4, 2016 to reveal it would opt out of the talks.

In the letter, Mr Mramba suggested Symbion and Tanesco were in negotiations for the power purchase agreement. “We wish to inform you that Tanesco has formally withdrawn from being party to the intended PPA [power purchasing agreement],” he wrote. “You will recall that Tanesco and Symbion were negotiating a long-term power purchase agreement which would have been executed subsequent to issuance of necessary approvals from the government and other relevant authorities. Tanesco is in receipt of categorical directives from the government to suspend the execution of the intended PPA on any party thereof as from the date of this letter,” reads part of the Tanesco’s communication.

Following this communication, Mr Hinks wrote to the government, on May 10, to protest the move and demand that the firm’s contract be enforced as signed last year. Mr Hinks’ letter was sent to Energy and Minerals minister Sospeter Muhongo and copied to the Attorney General and the State House. In the letter, he enumerated the process leading to the signing of the PPA on December 10 and suggested Tanesco’s latest move was dishonest.

The Symbion MD complained that despite signing the contract, Tanesco had not paid them for the power supplied since then on grounds that the PPA was “under review” and “on hold.”

“We believe that we have been extremely patient and understanding as months of non-payment have elapsed but we must now insist that Tanesco fulfil its contractual obligation to pay Symbion for the power we have produced and which we are delivering every day,” wrote Mr Hinks.

The agreement with Tanesco, was to supply the 112MW for 15 years at a capacity charge of $17.66/KW per month and an energy charge of US cents 0.35 per KWh, the cheapest among all the independent power producers serving Tanesco.

Mr Mramba has been unavailable since Wednesday to shed light on the dispute or the decision to turn around the said Symbion contract. Prof Muhongo would not answer our questions when told about the existence of the December 10 contract, insisting only that the matter was between the two parties.

“As government we will not issue statements based on media queries. I will issue my reaction when it is necessary,” he told The Citizen in a telephone interview yesterday. Calls to the Attorney General George Masaju were not being answered and a text message sent to his known mobile number had not been replied to by the time of filing this report.

The Symbion’s senior vice president for Public Affairs and Communications, Mr Adi Raval, confirmed they have a contract with Tanesco and urged speedy and consensual resolve to the developing standoff.

“Symbion has a legally valid 15-year power purchase agreement that was signed by both Symbion and Tanesco in December 2015. We have comprehensive records to support anything we might say, it is important to note that legally, this PPA cannot be terminated unilaterally by Tanesco. “The public should probably wait for the truth to surface and also wait to see how this plays out before anyone passes judgement. In the meantime we will be patient and will not be distracted by attacks on us.

Asked about the move to sue Tanesco in France, Mr Raval said: “We hope that common sense might still prevail and a major dispute can still be averted. It is far too early for us to set things straight about what has been going on in Tanzania over recent months.” 
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