Bangladesh News

The Power Cell’s move to disqualify Summit Industrial and Mercantile Corporation from the Bibiyana 450 megawatt (MW) and the Sirajganj 450MW power project tenders has shrunk competition and raised serious questions about fairness of the tendering process.

The Power Cell, under the power ministry, in a letter informed Summit of its disqualification to participate in the Sirajganj power project in January 10 without giving any explicit reason. On February 14, the cell in another letter disqualified Summit in the Bibiyana project citing reasons that Summit thought were wrong and unjust.

A top source of the cell told The Daily Star yesterday that the cell will hold a meeting with Summit representatives to clarify why Summit was disqualified.

“Summit appealed to the cell to review its exclusion and give a decision by February 28. So we are inviting Summit to better explain the issue,” said the source.

Summit’s disqualification has surprised all power industry operators, as it had gained a stable reputation in the power sector for nearly 10 years. Plus, the arbitrary exclusion of Summit has severely narrowed down competition in the two large-scale power projects.

The Bibiyana tender will now have only three competitors and Sirajganj just two. “This could mean the cell may not get the best offers,” said an industry operator.

Presently operating the 100MW Khulna barge-mount plant and several small power plants, Summit was previously about to be awarded with the 450MW Sirajganj power project in 2004. Summit had also finalised finances from the World Bank and Asian Development Bank (ADB). However, the then prime minister Khaleda Zia had cancelled awarding the project without citing any official reason. Unofficially, she did so because the chief of summit was considered close to her political rival, sources said.

Last year, Summit chief Aziz Khan was told to file an extortion case against Awami League chief and ex-prime minister Sheikh Hasina for allegedly unfairly awarding his company with the Khulna barge-mount power project in 1998. Aziz Khan did not file the case. The Anti-corruption Commission (ACC) later filed against Hasina a case in which he is a co-accused in connection with bribing the ex-prime minister.

Ever since, Khan is staying abroad but his company participated in two large power project tenders. The pre-qualification process for the bids began in October last year starting with the Bibiyana power project.

In the Bibiyana project, the cell pre-qualified US companies AES and Chevron, which also operates the Bibiyana gas field, Korean Kepco, Malaysian Powertek along with Siemens and “conditionally” qualified Summit and disqualified Malaysian YTL on ground of minor deviations. In the Siranjganj project, the cell prequalified just AES, Kepco and Powertek last month.

Interestingly, soon after this pre-qualification, Kepco and Powertek on Februrary 11 announced that they would merge and bid as one–thus shrinking the competition in Bibiyana and Sirajganj.

The cell’s letter noted that Summit was designated as a conditionally qualified bidder because its financial statements were not prepared in accordance with the International Accounting Standards (IAS). The cell on December 4 named four auditors and asked Summit to have its finances audited as per the tender rule by employing any of the four auditors. The audited financial statement should reach the cell before January 15.

The Bibiyana tender requires that a bidding company’s net financial value would be more than $100 million.

Summit accordingly submitted its audited financial statement complying with the IAS within the deadline. Even though the auditor puts Summit’s net financial value at more than $121 million, the cell arbitrarily puts its own financial evaluation at only $32.5 million. The cell termed the company “non-qualified bidder”.

In response to this letter, Summit on February 17 wrote back to the cell expressing its surprise. It said, “The Power Cell made the aforesaid conclusion on the basis of consolidated figures, not the company figures.” It added that it fully complied with the financial requirements spelled out in the tender terms and conditions.

Summit has also submitted IAS-compliant financial statements for the last three fiscal years which shows that it made profits in each of these years.

Summit sources explained that ignoring the auditor’s report, the cell evaluated Summit’s net value on the basis of the company’s original share values–not the current share values.

However, a top official of the Power Cell says, “We are going by the auditor’s report. There are different types of parameters to look into and we did exactly that.”