VIP firm demands 787bn/- damages for ‘fraud’ in IPTL case

VIP Engineering and Marketing Limited has sued six firms, including Standard Chartered Bank, demanding 490.9m US dollars (about 787bn/-) in damages for fraud, conversion of rights and corporate waste in dealing with its interests in Independent Power Tanzania Limited (IPTL).

The suit, which has been registered as civil case number 229 of 2013, was lodged at the High Court in Dar es Salaam last week against Standard Chartered Bank PLC, Standard Chartered Bank (Hong Kong) Limited and Standard Chartered Bank (Tanzania) Limited.

Other defendants are joint liquidators of Mechmar Corporation (Malaysia) Berhad, Wartsila Nederland BV and Wartsila Tanzania Limited. VIP, the plaintiff in the matter, is also seeking, apart from the monetary damages and compensation, a declaration that the company (VIP) and IPTL have suffered substantial loss and damages as a result of the defendants’ actions and conduct and that neither the banks nor their agents have ever legally been IPTL creditors.

The plaintiff is also requesting the court to declare that the defendants committed fraud, money laundering, corporate waste and oppression, diversion of funds and conversion of IPTL and VIP property, as a result of their conduct. Furthermore, the company is requesting the court to order Wartsila to carry out dual gas and heavy fuel oil conversion of the IPTL power plant at a cost of not more than 11.5m US dollars.

VIP, a local company being represented by advocates Respicius Didas, Michael Ngalo, Cuthbert Tenga and Dosca Mutabuzi in the matter, was until recently the owner of 30 per cent shares in IPTL, while the remaining 70 per cent were owned by Mechmar Corporation (Malaysia) Berhad.

IPTL was formed on November 1, 1994 for the purpose of constructing, owning and operating a power plant at Tegeta in Dar es Salaam. In 1995, the company entered into a power purchase agreement (PPA) with Tanzania Electric Supply Company (Tanesco).

Under the PPA, IPTL was to design, construct and operate the power plant to supplement Tanzania’s power supply and the duration of the agreement was 20 years. The power plant was under the engineering procurement and construction contract between IPTL and Wartsila (EPC Contract). The PPA provided for conversion of the IPTL power plant to operate on natural gas as quickly as practicable, which would reduce overall costs and improve the profitability and efficiency of the company.

“As of today, the plant has not been converted to operate on natural gas and its capacity has not been expanded because of fraudulent and deceptive practices of the defendants. This has resulted not only in the exacerbation of Tanzania’s power shortage, but also tremendously diminished IPTL’s and VIP’s profits,” the plaint reads in part.

Pursuant to the PPA, IPTL was entitled to receive certain payments after the commencement of commercial operation of the power plant, certain payments for maintaining the power plant in a state of readiness and payments for electricity actually provided pursuant to a tariff calculated to permit investors a reasonable rate of return.

Daily News Tanzania: