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Bibiyana-1 Power Project

Summit contract cancelled

Sharier Khan
The government has decided to end the deadlock over the Bibiyana phase one power project by terminating the contract with Summit Power and encashing its $3 million bid bond.
The power ministry on Monday asked the project's implementer Power Cell to take action on the ground that Summit could not close its finances for the 341 megawatt gas-fired power plant by its final deadline
ofFebruary 12,2013.
The power producer is currently implementing Bibiyana gas-fired phase two and Meghnaghat dual fuel power projects of similar sizes. It won all the three contracts in late 2010 through open tenders by quoting lowest prices.
But soon after signing the contracts in 2011, Summit faced problems with arranging finances. The company faulted the government for not being able to help it obtain a $200 million
Partial Risk Guarantee (PRG) from the World Bank. The PRG is the gateway to obtain loans from international financiers.
Due to the WB's stand on Padma bridge corruption, it refrained from cooperating in the private power sector, claimed Summit. The government, though, argued that Summit had not applied to the WB for the PRG.
Amid such dissonance between the
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two sides. Summit could not make headway with its Bibiyana 1 power project. However, it raised local bank loans and gave its own funds to kick-start the Meghnaghat project. From last year, it also could manage international funds for the Bibiyana 2 power project.
The Meghnaghat power project is set to start partial operation (225 MW) from November next and full operation from April next year. The Bibiyana 2 plant will begin partial operation in March 2015 and full operation later that year.
The Bibiyana 1 project had an extra catch as the contract obligated Summit to set up gas pipeline and power evacuation system costing $20 million. The contract for the Bibiyana 2 project did not include such
obligation, though its price offer is almost the same.
In June last year, Summit had verbally agreed to pull out from the Bibiyana power project where it had offered to sell power at a very low price of Tk 2.6 per kilowatt. In the present market, this price is considered as unusually low which the other bidders decline to match.
This prompted the government to try out a new venture there. In late last year, it had entered a memorandum of understanding with Advance Energy of Saudi Arabia. That company gave a price offer of $3.8 cents per unit. The deal did not make much headway.
Meanwhile, the government had also awarded a third phase contract in Bibiyana to Japanese company Marubeni, making
the Bibiyana 1 project irrelevant as the government would not be able to ensure enough gas to run three plants there.
"Now we will follow the due legal course," Summit chief Aziz Khan said yesterday.
"In August last year, we had served a termination notice on the government and claimed $45 million in compensation. But we didn't receive any response from the government. Last month we reiterated the notice requesting our bid bond and compensation. If there is any difference of opinion, they may go for arbitration," he added.
Operating power plants since 1998, Summit has recently set up three rental power plants ahead of schedules. It now produces 560 MW of electricity from a dozen plants.