Lone bidder\'s condition makes Bibiyana power project uncertain

Tag : AES implementation
The Bibiyana 450 megawatt power project has become uncertain due topoor handling by the Power Cell of the power ministry as its lonebidder Powertek Consortium has imposed a condition that thegovernment will be responsible for paying up to $15 million forcancelling the project before its financial closure.

This is the first time a private company has imposed such acondition on the government in a bidding process. Instead ofrejecting such an idea, the Proposal Evaluation Committee (PEC) ofthe Power Cell on Thursday forwarded this "exception" to the lawministry for opinion.

The bid originally participated by several companies has now onlyone 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, Powerteklast month submitted its bid proposal stating its request that the"government be responsible for up to $15 million of projectcompany's liabilities under EPC (Engineering, Procurement andConstruction) contract if the implementation agreement isterminated prior to financial close for any reason other than aProject Company Event of Default".

The cell requested Powertek to withdraw this "exception" on July29, which the company refused. It then sought clarification whyPowertek needed this kind of guarantee.

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

The consortium believes it will have to take significant financialrisk till the financial closure of the project to ensure deliveryof power and to provide a fixed price proposal for at least fivemonths.

In a letter sent to the law ministry on Thursday, the powerministry noted that if Powertek's exception is accepted, it wouldimpose "Contingent Liability" on the government. Therefore the lawministry may give its opinion on the matter.

The Power Cell has so far not succeed in completing any large powerproject tender in its lifetime except the Haripur 360 MW AESproject in 1998 and till date it completed tenders of some smalland rental power projects -- most of which were awarded toincompetent and wrong bidders.

The Bibiyana tender initially attracted pre-qualification bids fromAES, Chevron, Powertek, Kepco, Summit and Malaysian YTL late lastyear.

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

Previously qualified for the Sirajganj 450 MW power project, Summitrepeatedly requested the Cell for reconsideration in vain. Theworld's leading turbine manufacturer GE was holding 20 percentstakes with Summit in this bid.

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