Tanesco Announces Favorable Decision From Tribunal in Its Long-Standing Dispute With Power Developer.

Business Editors

LONDON--(BUSINESS WIRE)--Feb. 16, 2001

A London-based arbitral Tribunal has issued a decision favorable to state-owned Tanzania Electric Supply Company Limited (TANESCO) on several key matters in its ongoing dispute with the developer of a 100 MW power project located near Dar Es Salaam, Tanzania.

In a February 9, 2001 ruling, the Tribunal agreed with TANESCO that the $150 million in costs claimed by developer Independent Power Tanzania Limited (IPTL) to develop and construct the 100 MW power plant were too high. Finding that IPTL has failed to incur project development costs reasonably and prudently as mandated by the parties' Power Purchase Agreement, the Tribunal ordered that IPTL's claimed project costs must be reduced by approximately $21 million for purposes of tariff calculation for the power project.

In a second rebuke to the Malaysian-controlled developer, the Tribunal ruled that TANESCO was not required to pay IPTL more than U.S. $53 million in claimed damages resulting from delayed commercial operations of the plant while the tariff dispute has been ongoing. The Tribunal found that IPTL acted in bad faith during tariff finalization negotiations by failing to disclose to TANESCO documents relating to the bidding process leading to award of a U.S. $114.2 million plant construction contract to Stork-Wartsila Diesel B.V. Based on documents evidencing that bidding process, which IPTL was ordered by the Tribunal to produce during the arbitration proceedings, the Tribunal ruled that that plant construction cost must be reduced by U.S. $16 million from $114.2 million to $98.2 million for purposes of calculating the tariff payable by TANESCO.

The ruling came after five days of hearings in July 2000 before the three-arbitrator Tribunal of the International Centre for the Settlement of Investment Dispute. For more information, please contact Robert Hawkins at 202-955-1664.