"BON has not submitted the performance security deposit of $10 million by July 15 as asked by the PDB. We had been very flexible with BON, but it is not reciprocating our cooperation," says a PDB high official.

Power ministry sources said BON's main financier Bahrain-based Capital Management House has recently written to the ministry that it would be unable to arrange for the finances or submit the $10 million deposit before December. This had prompted the power ministry to ask the PDB last week to follow the due legal course regarding the Meghnaghat-2 power project.

A source said the PDB had sought legal opinion in this regard a week ago. "We are now waiting for the opinion. But we can say that it's heading towards cancellation because BON has defaulted on deadlines and it has failed to respond to the flexibility offered by us," said a PDB official.

Being very accommodative, the caretaker government had offered BON Consortium extension of various deadlines from January when it failed to meet those.

On May 28, the consortium failed to meet its deadline for financial closure for the project and it blamed the country's "political instability".

A day before this, it requested the government to allow it an additional seven-and-a-half-month time for financial closure--pushing the deadline to December. The BON plea was accompanied by another letter from Capital Management House.

The power ministry agreed to extend the deadline. In early June, the PDB requested the BON Consortium, located at the Orion House in Tejgaon, to submit a performance security deposit of $10 million immediately and said that the financial closure deadline will be set upon submission of this deposit. The PDB even agreed to amend the contracts to accommodate these exceptions.

Orion Group's Obaidul Karim--who bagged many large-scale contracts during the five years of four-party rule--created BON Consortium. BON initially stood for Belhasa (UAE), Orion Power (Bangladesh) and Nisso Eiwi (Japan)--where Nisso was the lead bidder in the project's tender. Neither Belhasa nor Orion qualified for the power project, while Nisso's experience qualified BON's bid. But after the bid selection, German company Steag replaced Nisso.

Officials and power industry players had been doubtful whether BON would ever be able to carry out this project as Obaidul Karim and the consortium's "official" leader Steag is nowhere to be seen. To make the matter worse, officials claimed the global cost of setting up a power plant has gone up significantly--which make it even more difficult for BON to set up this plant without incurring huge loss under the contract that has already been signed. Apparently the Belhasa group is the only visible solvent partner of Orion in the deal.

Following the May 27 letter and legal homework, the PDB on July 4 concluded that as per the contract the deadline can be extended for some time as long as the Commercial Operation Date (COD) of the power plant remains unchanged, and that BON submits Performance Security Deposit.

Earlier, BON missed a deadline to pay up land rental and other fees on January 21 and faced a notice of "Project Company Event of Default" to demand payment of Tk 6.22 crore by February 22 or face cancellation of the contract. A representative of the Belhasa Group paid the money at the last minute saving the cancellation of the contract.

During this phase, the Belhasa representative proposed the government that it would take over Orion's share (only 16 percent) and drive the project on. Belhasa guarantees implementation, said one of its executives to the power ministry in February.

Obaidul Karim is wanted by the police in different graft and criminal cases in connection with swindling Tk 594 crore from Oriental Bank. Besides he is accused of heavily bribing a large number of ex-prime minister Khaleda Zia's close men to unfairly bag various deals--including the Sayedabad-Jatrabari flyover project where the Belhasa group is partnering with Orion.