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Strong lobbyists out to grab rental power deals

Defaulter firms too in the race; bidding deadline expires Oct 29

Sharier Khan
A section of businessmen backed by some pow erful ruling party men have mounted severe pressure on the Power Development Board (PDB) to award them various power contracts by "all means", which the authorities believe would erode real investors' confidence and jeopardise the government's power sector goals. The PDB received huge response against its cal) of tender for eight rental power projects totalling 530 megawatts capacity and 10 public sector power projects of 810MW. These tenders will close on October 29.
A top PDB source noted that till Thursday, the PDB sold 67 tender documents for the rental projects and 83 for the public sector plants.
But much of this huge response has
been attributed to a section of businessmen who do not have power sector experience and want a "piece of the cake" at any cost. They are interested in rental projects because the power tariff is higher there than other types of power projects.
Some of them even include defaulter power developers like Energy Prima and Venture Energy--who had not completed any of their past rental power projects on time or paid demurrage to the PDB for their failures.
Sources said owners of these companies are now even claiming to different interested bidders that they have the blessings of some business leaders close to the prime minister and that they have been assured of getting the projects.
"Whether they have the power plant equipment or capacity to build plants are secondary. They believe once they bag the contracts, they would somehow make the PDB pay," said a well-placed ministrysource.
Such a bizarre perception is based on the fact that the PDB could not actually cancel failed rental power contracts in the past or even collect penalty money as per contract. In fact defaulters like Energy Prima and GBB had resorted to die court to obtain injunctions against paying penalty.
These businessmen have already succeeded in making the PDB relax its rental power project bid closing deadline to October 29 from October 21. The PDB has also relaxed its bidding clause to allow captive power developers (those who have experience of setting up power generators for industrial purpose without connecting those to the national grid) to bid for the rental power projects.
Sources said the state minister for power had initially asked the PDB and the power ministry to extend die deadline by one mondi to accommodate bids from certain local investors. But following discussions with officials, he was later convinced that such a rescheduling would affect the government's power sector goals. Accordingly the power division formally asked the PDB to shift the deadline to October 29.
"We tried our best to stick to our original deadline. But we had to shift it in the greater interest of a successful bidding process," said a top PDB official.
The idea of including captive power developers in the bid will not benefit the tender process as rental power plants demand that the bidder have their own equipment in stock which they are ready to install at a short notice and uninstall when the project duration ends.
"Captive power developers do not have any plant equipment in their stock; they would go out in the international market to procure equipment and would not be in a position to uninstall the plant when the project duration ends simply because that would inflict huge loss," explained a source. "What these people are counting on is that there is perennial power crisis in the country' and therefore once they install a plant, their contracts will continue," headded.
The PDB earlier had expressed its determination for sticking to its deadlines to ensure that the rental power projects come into operation within the next irrigation period. It also had committed to entertain "genuine and professional" bidders who
would deliver power within the government's deadline and not just try to milk the PDB without actually keeping its commitments.
Several policymakers and the PDB in recent months repeatedly said that the government aims at zero load shedding beyond 2010. But as lobbyists keep on mounting pressure on the PDB and the Power Division, officials now fear such an objective would remain a far cry' unless the prime minister herself intervenes to ensure an influence-free and transparent bidding process.
Tf we can hold the tender process as transparent as that of 1996-97, we are sure that the government would succeed in getting good power deals. The price of power plant equipment in the international market right now is at the decade's lowest. It is a good time for getting good tariff. But to ensure good deals for the government and the people, we need to have a tender process that commands investors' confidence," said a top PDB official.
Meanwhile, defaulter local power company Venture Energy has obtained PDB's certificate of qualification on Bhola rental power plant, which the company launched after more than a year of delay.
Ironically, the contract with Venture Energy is for three years. Venture Energy’ was supposed to launch its 34 MW plant in May 2008, within three months of signing the agree-
ment with the PDB.
This certificate was issued just to allow Venture Energy to qualify and participate in the current bid for rental powers.
The certificate states that Venture Energy is providing rental power services as per the contract. What it did not say is that Venture Energy had grossly violated the contract and has not yet paid all financial penalty for its failure as per the contract.
The diesel-based rental projects will have three years contract while the furnace oil based ones five years. The diesel projects are: Bheramara 100MW, Katakhali 50MW. Thakurgaon 50MW and Syedpur 50MW. The furnace oil-based projects are Noapara 100MW. Madanganj 100MW, Jamalpur 30MW and Barisal 50MW. The diesel plants will be given 120 days for implementation and the furnace oil plants 270 days.
The public sector power tenders, which will close on October 28, are for Gopalganj 100MW, Hathazari 100MW, Dohazari 100MW, Bera (Pabna) 70MW, Katakhali (Rajshahi) 50MW, Shantahar 50MW, Baghabari 50MW, Faridpur 50MW, and Daudkandi 50MW. The lone gas-fired public sector power plant will be set up at Ashuganj with 200MW capac->ty
Bidders will have to submit $1 million bid bond for the 200MW power plant, $300,000 for 100MW plant. $240,000 for a 70MW plant and $150,000 for a50MWplant.