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Rental Power Contract

Failed company vie for renewal

Sharier Khan
A local company that owes the government more than $ 67 million in penalty for failing to supply electricity from its two rental power plants is lobbying hard to have one of its two contracts renewed for five years.
The company, Quantum Power, had signed a contract with the Power
Development Board (PDB) in February 2010 to generate 110 megawatt of electricity from a diesel-fired rental plant in Bheramara. The contract is due to expire on December 31.
This plant turned out to be one of the worst performing plants and had been penalised time and again over the years, the
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amounts totalling to $ 33.5 million.
A sister concern of furniture giant Otobi, the company also signed a five-year contract in February 2010 for supplying 105 MW of power from a heavy fuel oil (HFO)-fired rental plant in Noapara. This plant too has performed very poorly, leading to a penalty of $ 34.2 million.
However, instead of paying the penalty, Quantum Power last year went to the High Court and obtained injunctions, according to which the PDB is barred from collecting the fine, but must pay for power purchase.
Despite the conflict, the company a few months ago turned up to a power ministry committee on rental power projects proposing extension of its contract for the Bheramara plant.
"The Quantum Power has proposed that it would withdraw its case against PDB if the contract was renewed and it was allowed to
convert its loss-incurring diesel-fired plant into a HFO-fired one by investingTk 115 crore," said a high official of the ministry.
Quantum argues that this way the government would be able to save a lot of money as HFO is cheaper than diesel.
"But we don't see how that helps them make any profit. Their project is dead. It generates 15 MW of power instead of a minimum of 104 MW," the official added.
He said Quantum's overall approach to power business seemed wrong, especially since it had set up its two rental power plants with obsolete and malfunctioning machinery.
The power ministry committee has meanwhile decided to extend three rental power contracts belonging to Precision, Energies and Desh Energy, which are also defaulters to some degrees. These companies, like Quantum, had also obtained court injunctions to stop the PDB from collecting the penalties.
However, the case of Quantum is the worst.
"We want to help this company from sinking. Not only it defaulted with the government heavily and refrained from paying the penalty through court injunctions, we know that Quantum Power also has huge bank loans. We don't see how it would ever pay the government if we extend the contracts. We can't help Quantum Power killing ourselves," said a well placed official of the power ministry.
As per the contract, Quantum was supposed to begin commercial operation of the Bheramara plant within four months of signing its contract on February 4, 2010. But it launched the plant after 10 months and faced a penalty of $ 11.4 million, of which it haspaid $ 8.2 million.
After the plant had begun operation, it could never deliver the minimum 104 MW power as required by the contract due to sub-
standard machinery.
The contract allows Quantum to keep its plant shut for 876 hours (or 36 days) in each contract year, but it remained shut for 5,465 hours (227 days) between December 2011 and December 2012.
A similar situation prevails with Quantum's Noapara 105 MW plant, which began commercial operation 18 months after the contract signing instead of nine months. It produces just around 15-20 MW power and most of the time remains out of operation.
Managing Director of Quantum Power Animesh Kundu said, "The fine is actually about $ 15 million, not $ 67 million. There are some mistakes in PDB calculation. That needs to be corrected."
He also added that his company would withdraw the case against PDB if the Bheramara plant contract was renewed.