How $270-million IPTL deal was planned and executed

Tanzania ELECTRIC supply COMPANY (TANESCO) Headquaters in Dar es salaam.

Dar es Salaam. The controversial Independent Power Tanzania Ltd (IPTL) takeover deal that involved part of some $270 million from an escrow account was initiated on August 11, 2010, The Citizen can reveal today.

An escrow account is a financial instrument held by a third party on behalf of two others in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled.

Since the two parties, Tanesco and IPTL were involved in a legal tussle in Washington-based tribunal, it was then agreed that an escrow account be opened at the BoT—and Tanesco deposited all payments mean for IPTL pending the determination of the main civil cause in USA.

Some of the key conditions for this escrow account was that if Tanesco wins the case, it would be refunded the extra payments it has made, after an appropriate calculation, agreed by both parties, as directed by

Washington-based tribunal.

According to investigation conducted by The Citizen, the plan was supposed to be executed before the General Election, but was shelved due to what was termed “technical issues”.

Mechmar Corporation (Malaysia) Behard, which used to own 70 per cent of IPTL shares, wrote a letter to former permanent secretary for the Energy and Minerals, David Jairo, proposing that the company’s share be transferred or sold to a company chosen by the government.

The letter was signed by the company’s managing director, Mr Datuk Baharuden Majid, according to details obtained by The Citizen.

“We refer to the discussions held between you and the undersigned in connection with the above subject…as desired by you, we hereby submit Mechmar’s proposal for your consideration,” reads part of the letter.

It further reads: “Mechmar Corp is willing to sell its shares in IPTL to the government of Tanzania or Tanesco or any other entity nominated by the government…Merchmar Corp will also simultaneously assign all its rights in respect of the shareholder loan.”

Mr Majid also adds in his letter: “Merchmar Corp will take such steps and execute such documents or may be required to assuage the concerns of the government of Tanzania in relation to claims of other parties.”

He goes on: “Merchmar Corp will also give an irrevocable undertaking to cooperate and assist the government of Tanzania as well as Tanesco in resisting and defending against any such claims and to assert its own claims.” In the one-page letter, of which The Citizen obtained a copy, Mr Majid further states that his company would be happy to discuss the aspects mentioned above and negotiate the amount of composite.