Bangladesh News

The power ministry has decided in principle not to extend deadlines for four rental power projects totalling 155 MW capacity for their repeated failure to launch commercial operation and would ask the Power Development Board (PDB) to take action as per contracts.

It means contracts of these projects would face cancellation and penalty, sources say. The cancellation would pave the way for new decisions regarding future rental power projects, which are a temporary fast-paced power solution.

These power projects are the gas-fired Fenchuganj 50MW plant and Bogra 20MW of Energy Prima, 34.5MW Bhola plant of Venture Energy and 50MW Ashuganj plant of Precision Energy.

All of these were supposed to come into operation last year, within 120 days of signing the contracts, but failed.

All of them were inexperienced local companies that had ventured into this rental power project without having any plant equipment in their inventory.

The success of rental power plants, which should be installed quickly as a short-term or mid-term facility charging higher power tariff, depends on having equipment ready for installation.

Sensing that the ministry and PDB were set to take stern action this time, the rental power contractors have taken into partnership some pro-Awami League businesspersons in their projects and mount pressure on the government to refrain from taking any actions, the sources add.

The sources say both the Fenchuganj and Bhola plants, which were supposed to come into operation in mid-May last year, were given two deadlines. But these failed to achieve the Commercial Operation Date (COD). The last deadline for both of these plants expired on February 28.

As per the agreements, neither Energy Prima nor Venture Energy gave PDB any additional liquidated damage after extending the first deadline.

Outside the official extension of the deadlines, both of these companies are spelling out various deadlines and failing to achieve them on their own.

The PDB board has decided to seek the consent of the power ministry to cancel the contracts for both these plants.

On the 20mw Bogra power project of Energy Prima that also failed to meet deadlines twice, the last one expiring on March 31, PDB has decided not to give it more time. The Bogra plant was supposed to come into operation in mid-May 2008.

However, as the Energy Prima had filed a case against PDB to stop it from taking liquidated damage, PDB would not cancel the contract and follow the court’s directive.

On the 50mw Ashuganj plant awarded to an unknown Precision Energy, PDB gave it an extension till March 31. But it failed to do so and also did not give PDB any additional liquidated damage coverage for recent times.

The Ashuganj project was originally supposed to come into operation on October 27, 2008. But Precision Energy told PDB it has not been able to arrange loan for the project.

Besides, there is no visible progress for the plant. In this situation, PDB recommends cancelling this deal.

Meanwhile, Energy Prima is trying to dictate terms for payment of its liquidated damage. Against a contract of three years, it is asking PDB to take monthly liquidated damage in 36 instalments.

When PDB pointed out that out of these 36 months, Energy Prima has already exhausted nearly 12 months, the power company suggested that the rental scheme should continue for 10 years.

The Power Cell floated the rental power bids in October-November, 2007 drawing 15 offers from six companies in eight locations totalling 300mw generation capacity.

The contracts for most of these were signed in January 2008. Of these deals, two 50MW power plants of Energy Prima came into commercial operation many months behind schedule and one 40MW plant of British Aggreko came into commercial operation 15 days behind schedule.