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Intra Energy unit in dispute with local contractor over Tanzania coal project

Intra Energy Corp. Ltd. subsidiary Tancoal Energy Ltd. received two claims from local contractor Caspian Ltd. over a dispute related to the Tancoal coal project in Tanzania.

Tancoal was served on Sept. 7 a chamber summons, which aims to prevent Tancoal from sending money outside Tanzania, and a petition for administration order, which seeks to appoint a Caspian-recommended administrator to take over Tancoal for two years.

Intra Energy said Sept. 11 that the move came following Tancoal's attempts to renegotiate a three-year contract with Caspian, which has delivered "poor performance" since both parties signed the deal in 2017.

According to Intra Energy, Caspian's equipment, contracted to arrive in April 2017, were brought in late by nearly two months and were not fit for purpose. Despite that, Tancoal increased production to meet market demand.

As a result, Tancoal only allowed Caspian to work for a minimum of 300 hours per month, as stated in the contract, while parking Caspian's fleet for the remainder of each month as other contractors carried out the work.

The company added that it signed the contract with Caspian "under considerable pressure to commence work immediately." Tancoal was only given four days to sign a contract with Caspian following a March 2017 directive from Tanzania's Ministry of Industry, Trade and Investment.

Tancoal has withheld payments to Caspian in its attempts to renegotiate the deal. In July, the contractor rejected Tancoal's latest bid of paying 50 Australian cents on the dollar for the arrears and Caspian's exit from the contract. Caspian has not made a claim on the unpaid dues.

Intra Energy said it is seeking legal advice and consultation with the Tanzanian government to resolve the issue, while insisting that arbitration procedures in the contract should be followed.

Recently, Tanzania's ministry of minerals requested a royalty payment of US$1.1 million from Tancoal and threatened not to reissue permits for coal transportation if the company does not comply.

The Tancoal mine is a 70/30 joint venture between Intra Energy and state-owned National Development Corp. of Tanzania.