Deal with Obaidul Karim’s group set to be cancelled

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The Power Development Board (PDB) yesterday served scamster Obaidul Karim’s shell company BON Consortium with a notice for terminating the power purchase agreement (PPA) with it on Meghnaghat-2 450 megawatt power project.
In a letter to BON Consortium’s Orion House office at Tejgaon in the capital, the PDB said BON failed to close the project’s financial arrangement within the agreed deadline of May 27 last. The PDB then gave it an extra time till July 15 to meet its contractual obligations but it failed again.

“Under this circumstance, pursuant to Aricle 4.4 (a) (of the PPA), PDB hereby issues Notice of Intent to Terminate the Power Purchase Agreement signed with you on March 09, 2006,” the letter said.

In a separate letter, the PDB conveyed its decision to the power ministry saying that its legal adviser has suggested termination of all contracts with BON on the project.

PDB’s legal adviser Barrister Tofailur Rahman has noted that BON has failed to meet its original financial closure deadline and subsequently the July 15 deadline. In this situation, the PDB may issue a notice of intent to terminate the contract with a 45-day consultation period.

With the termination of the PPA, the other contracts with BON — a Land Lease Agreement, Gas Sales Agreement and an Implementation Agreement– will also have to be terminated simultaneously, he said.

The legal adviser added that under the Implementation Agreement (IA) with BON, the PDB may liquidate BON’s project proposal security money.

The PDB has come to this decision although it had tried its best to pursue this contract with BON Consortium after its chief scamster Obaidul Karim of Orion Group fled the country in January to avoid arrest for misappropriating Tk 590 crore from Oriental Bank.

In the absence of Obaidul Karim, a representative of the UAE- based Belhasa group visited Dhaka assuring the government of continuing the project financing. But the company failed to meet various deadlines one after another while giving the government an impression that it was working on the project. The government kept its options open but asked BON to provide a $10 million security deposit against the project by July 15.

In mid-July, BON’s main financier Bahrain-based Capital Management House (CMH) wrote to the power ministry that it would be unable to arrange the financing or provide the $10 million security deposit before December 2007.

This has prompted the power ministry to ask the PDB to follow due legal process regarding the Meghnaghat-2 power project.

On May 28, the consortium failed to meet its deadline for financial closure for the project, blaming “political stability in the country. A day before, it requested the government to allow it an additional seven and a half months time for financial closure, pushing the deadline to December. The BON plea was accompanied by another letter of CMH.

The power ministry agreed to extend the deadline. In early June, the PDB asked BON to provide a performance security deposit of $10 million immediately and said the financial closure deadline will be set after that. The PDB even agreed to amend the contracts to accommodate these exceptions.

Orion Group’s Obaidul Karim, who had bagged many large-scale contracts during the five-year BNP-led alliance rule, formed BON Consortium. BON initially stood for Belhasa (UAE), Orion Power (Bangladesh) and Nisso Eiwi (Japan), where Nisso was the lead bidder in the project’s tender. Neither Belhasa nor Orion qualifies for this power project, while Nisso’s experience qualified BON’s bid. But after the bid selection, Nisso was replaced by German company Steag.

Officials and power industry players were too doubtful whether BON would ever be able to carry out this project as Obaidul Karim and the consortium’s “official” leader German Steag were nowhere to be seen.

Earlier, BON had missed a deadline to pay up land rental and other fees on January 21 and faced a notice for “Project Company Event of Default” to pay up Tk 6.22 crore by February 22 or face cancellation of the contract. A representative of Belhasa group paid that money at the last minute and evaded the cancellation.

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