Deal finally scrapped

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Upon completion of all legal formalities, the power ministry on September 25 asked Power Development Board (PDB) to cancel the contract for Meghnaghat phase-2 450 megawatt (MW) power project signed with scamster Obaidul Karim’s shell company BON consortium.

Following a move by the PDB in this regard on July 30 this year, the power ministry followed all legal processes before deciding to cancel the deal.

This is the first such instance of cancellation of a private power deal for a power company’s failure to close project financing.

On September 25, the power ministry in a letter asked the PDB to take all measures to cancel the deal with BON Consortium as per clause 4.4 of the Power Purchase Agreement (PPA) with the company. Alongside, the PDB was asked to cancel the project’s Implementation Agreement (IA).

The PDB on July 30 served BON Consortium with the notice to terminate the project’s PPA.

In a letter to BON Consortium’s Orion House office in Tejgaon, the PDB said the BON failed to close the project’s financial arrangement within its agreed deadline of May 27 last. The PDB then gave it extra time until July 15 to meet its contractual obligations, but the BON failed again.

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

PDB’s Legal Adviser barrister Tofailur Rahman in his opinion noted that BON has failed to meet its original financial closing deadline and subsequently the July 15 deadline. Under this situation, the PDB may issue a notice of intent to terminate the contract with 45 days of consultation period.

The 45-day period expired mid-September.

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

In the absence of Karim, a representative of the UAE based Belhasa group visited Dhaka assuring the government of continuing the project finances. However, the company failed to meet various deadlines–while giving the government an impression that it was working on the project. The government kept the options open but had to ask BON to submit $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 ministry that it would be unable to arrange the finances or submit the $10 million security deposit before December 2007.

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

Orion Group’s Obaidul Karim, who had bagged many large-scale contracts during the five-year BNP-led alliance government’s rule, made 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, German company Steag replaced Nisso.

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