APR ENERGY: TANZANIAN GOVERNMENT READY TO SETTLE?

UNCLAS DAR ES SALAAM 000120 SIPDIS SENSITIVE AF/E FOR JLIDDLE, AF/EPS FOR ABREITER, INR/RAA FOR FEHRENREICH PASS USTR FOR PATRICK COLEMAN, WILLIAM JACKSON COMMERCE FOR BECKY ERKUL TREASURY FOR REBECCA KLEIN NAIROBI PASS FCS E.O. 12958: N/A TAGS: PGOV ECON EINV ETRD TZ SUBJECT: APR ENERGY: TANZANIAN GOVERNMENT READY TO SETTLE? REF A: Dar es Salaam 71, B: 2008 Dar es Salaam 130 ¶1. (SBU) Minister of Energy and Minerals William Ngeleja called in Charge Feb. 25 to discuss the latest GOT discussions on the ongoing tax dispute with Florida-based APR Energy, LLC (background in ref a). Ngeleja told CDA and Poloff that he is paying attention to the issue. He said that at the last Parliament session (early Feb.),he had convened a meeting with Finance Minister Mkulo to discuss the matter. He said the relevant government bodies were now working on the issue with the aim of finding an amicable resolution. Ngeleja commented that, as a lawyer by profession, the original contract left a lot to be desired, but that APR's argument had some justification. He said he was thankful APR had been patient and not taken the matter to court. (Comment: This may be somewhat disingenuous, since the initiation of court proceedings would most likely result in APR's equipment being kept in Tanzania indefinitely. End comment.) Ngeleja agreed that APR should not be penalized because of public perceptions about other power deals (i.e., the Richmond scandal, ref b). ¶2. (SBU) Charge told the Minister that the U.S. sought a fair and just resolution of the dispute that would permit the export of APR's plant. Charge expressed his appreciation for recent GOT efforts, noting that a quick solution would be in the interest of all sides. ¶3. (SBU) Prior to the meeting, APR gave us a similarly positive but more detailed readout of a Feb. 24 meeting with representatives from the Ministries of Energy and Finance, plus Tanesco and the Tanzania Revenue Authority (TRA). The parties will work from the framework agreed in late 2008 (from which the GOT withdrew its consent),with the additional step of calculating the VAT and corporate tax (which APR has consistently rejected paying). In the meantime, the threat to auction APR's plant will remain on hold. APR informed us that permission to export the plant is fundamental to any agreement. At the same time, TRA continues to insist on receiving payment. ¶4. (SBU) Comment: President Kikwete's convening of a new review (at our urging) seems to have motivated the relevant ministries to seek a deal. At the very least, the sides have pulled back from the threat of auction and legal action. However, it is still too early to say that the GOT will organize itself sufficiently to find its way to a deal acceptable to APR. ANDRE