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Summit’s big power projects in limbo

It fails to arrange fund, refuses to surrenderc

Sharier Khan
The fate of two large gas-fired private power projects — Bibiyana-1 and 2 — has become uncertain as the contractor, local company Summit, can neither arrange finance for those nor will it give up trying.
As per the agreement with the government, Summit was supposed to close its finance in February for both the projects — each with 341-
megawatt capacity. The company won the tender for these projects by offering a very low price of around Tk 2.6 per kilowatt hour for 22 years.
In February, Summit sought one month's time but till date it could not arrange the fund.
The company claims it is facing the problem because the World Bank, which initially promised a partial risk guarantee (PRG), has
refrained from doing so apparently because it won't fund anything unless the Padma bridge corruption allegation is cleared. The WB's PRG gives all lenders the confidence that it will finance such power projects.
In this situation, the government cannot cancel the contract with Summit and go for a re-tender or take any other measure, said a high official of the power ministry.
For the government, this is certainly a bad news since it was counting on these big power projects to provide, from late 2013, the much-awaited respite from energy crisis. As an interim solution, it had opted for rental power projects to manage load shedding.
But day-to-day operation of these rental plants, fuelled by imported oil, is so costly that the Power Development Board ran out of the subsidy to buy oil. Thus the PDB has imposed huge load shedding despite availability of enough power generation capacity.
A top PDB official said the government is trying to work out a solution regarding the Bibiyana projects.
Summit chief Muhammad Aziz Khan explains his position saying, “As per the request for proposal for the Bibiyana tenders, the government gave the bidders assurance of arranging the PRG from the World Bank. But it has failed to do so.
“We are a victim of the situation. The World Bank is not giving us fund because it has to settle first the Padma bridge issue. The bank has verbally informed
us that its relationship is with the [Bangladesh] government. They are discussing the [Padma bridge] matter with the government.”
The WB suspended funding for Padma bridge in September last year, alleging foul play by the then communications minister Syed Abul Hossain in promising a Canadian consultant company a supervisory job in the bridge project.
“Then we went to the IFC [International Finance Corporation] of the World Bank who informed us that the bank's group compliance department is reviewing all transactions of Bangladesh,” Aziz said.
While the Summit chief claims the WB is not funding anything in Bangladesh, it signed in January a $290 million project to support the local government development in the country.
Summit is also enjoying extension of its contractual deadline in another way. As per the agreement, the government was supposed to hand over to it the land for setting up the two gas-fired power units by October last year. But for some unknown reasons, the PDB has not yet been able to get the land registered for Summit.
“This has entitled us to a day-to-day extension," Aziz said.
Summit was upbeat early last year when it secured the two Bibiyana projects along with another power project in Meghnaghat. Back then, it had said different lenders had assured it of up to $2 billion funding. However, in reality, no international lender gave what they had promised.
In this situation, Summit started the Meghnaghat project without any financial closure, but by arranging Tk 2,200 crore from different local banks, which was paid to the company's US bidding partner GE to design, procure and construct the 335MWdual-fuel plant.
“It is the biggest single local financing of any project in the country so far," said Aziz, admitting that the formal financial closure for Meghnaghat had not taken place.
Summit is currently operating nine power plants and supplying 560MW power, which is around one tenth of the country's daily power generation. Last year, it brought into operation three power plants as per schedule -- a feat that most local power companies have so far failed to achieve.