Bangladesh News

The Bibiyana 450 megawatt power project has become uncertain due to poor handling by the Power Cell of the power ministry as its lone bidder Powertek Consortium has imposed a condition that the government will be responsible for paying up to $15 million for cancelling the project before its financial closure.

This is the first time a private company has imposed such a condition on the government in a bidding process. Instead of rejecting such an idea, the Proposal Evaluation Committee (PEC) of the Power Cell on Thursday forwarded this “exception” to the law ministry for opinion.

The bid originally participated by several companies has now only one bidder and guided by the International Finance Corporation (IFC) that controversially disqualified local Summit group.

A consortium of a South Korean and a Malaysian company, Powertek last month submitted its bid proposal stating its request that the “government be responsible for up to $15 million of project company’s liabilities under EPC (Engineering, Procurement and Construction) contract if the implementation agreement is terminated prior to financial close for any reason other than a Project Company Event of Default”.

The cell requested Powertek to withdraw this “exception” on July 29, which the company refused. It then sought clarification why Powertek needed this kind of guarantee.

Powertek replied that it would have to pay the EPC contractor this sum as slot reservation fee, soil investigation and bathymetry study, anticipated down payment for major equipment.

The consortium believes it will have to take significant financial risk till the financial closure of the project to ensure delivery of power and to provide a fixed price proposal for at least five months.

In a letter sent to the law ministry on Thursday, the power ministry noted that if Powertek’s exception is accepted, it would impose “Contingent Liability” on the government. Therefore the law ministry may give its opinion on the matter.

The Power Cell has so far not succeed in completing any large power project tender in its lifetime except the Haripur 360 MW AES project in 1998 and till date it completed tenders of some small and rental power projects — most of which were awarded to incompetent and wrong bidders.

The Bibiyana tender initially attracted pre-qualification bids from AES, Chevron, Powertek, Kepco, Summit and Malaysian YTL late last year.

Summit was conditionally selected at first, but then in January it was arbitrarily disqualified and YTL was also disqualified.

Previously qualified for the Sirajganj 450 MW power project, Summit repeatedly requested the Cell for reconsideration in vain. The world’s leading turbine manufacturer GE was holding 20 percent stakes with Summit in this bid.

Soon after the pre-qualification, Powertek and Kepco announced its consortium and AES announced its withdrawal. Finally, when the bid submission date arrived, Powertek appeared as the lone bidder.