The Northwest Power Generation Company Ltd (NWPGC) allegedly signed a contract in secrecy for a 360-megawatt dual fuel power plant in Bheramara with Japanese Marubeni in mid-March, a few days before the latter was fined for corruption and blacklisted by the Japan International Cooperation Agency (Jica).
This was the third large power contract secured by Marubeni through separate tenders. Other bidders in all three tenders have filed complaints with the bidding authorities to the effect that Marubeni had been unfairly favoured.
The US Department of Justice on March 19 slapped a fine of $88 million on Marubeni for paying bribes to top ranking officials in Indonesia to secure a lucrative power project.
On March 26, Jica, which is financing the Bheramara power project, announced that Marubeni could not be involved in any procurement with it for nine months. Marubeni would also be ineligible to take part in procurement for grant aid and these measures would be applied to joint ventures as well.
“This decision was made because this company announced the agreement with US DOJ in which it admitted bribery in connection with the Tarahan Project in Indonesia,” Jica said in a public notice posted on its website.
Allegations are rife that Marubeni, after getting blacklisted, signed the Bheramara power project agreement and backdated it on March 16 with the help of the NWPGCL.
A top NWPGCL official denied the allegation saying, “It's true that we have signed the agreement in a hurry. It was because Marubeni requested us to sign the deal before its own financial year ended on March 17. Since we were ready to sign the deal, we saw no problem in it.”
Government agencies usually announce the signing of a contract and invite the press and others to witness the process. In this case, however, nobody knew anything until last week.
“We will soon hold a proper ceremony,” added the top official, who requested that he not be named.
The official claimed the contract had been signed through upholding the national interest and there was no corruption in the process.
“This is the cheapest power project [of the three contracts won by Marubeni],” the official said, adding, “The per kilowatt construction cost for Bheramara is $745, whereas the same costs are $851 in Bibiyana phase three and $919 in Haripur power projects.”
This comparison shows questionably wide variations in Marubeni's contracts, although it used almost the same equipment in all three projects.
Interestingly, the Bheramara project is based on dual fuel combined cycle, which should cost more than combined cycle to be used in Bibiyana and Haripur.
The NWPGCL official added they would not sign any Long Term Service Agreement (LTSA) with Marubeni to take care of the project's future operation and maintenance as the contract allows them to contact the plant's equipment manufacturer directly for the LTSA.
The LTSA is a costly operation as it gives the bidder an additional means to make money from a power project.
BHERAMARA TENDER ANOMALIES
In recent years, Marubeni has bagged three power contracts in Bangladesh. The authorities in the first two tenders technically disqualified other participants, making Marubeni the only qualified bidder. In the case of the Bheramara project, there was another competitor.
The Bheramara bid was floated in late 2012. Four bidders submitted their technical proposals that were evaluated late last year.
The tender evaluation report oddly mentioned that none of the bidders had met the qualification criteria set by the tender rules. However, it contradictorily qualified the Japanese bidders Marubeni and Sumitomo and disqualified the Japanese-Korean Mitsui-Posco and Spanish Duro Felguera.
According to the evaluation, Mitsui and Duro Felguera were disqualified on grounds that their GE and Siemens turbines did not meet “vibration” requirements. GE and Siemens are the world's largest and second largest turbine manufacturers respectively.
Marubeni's bid had three serious deviations, which have implications in the project price. One of these was ignored and two were given the scope to modify in violation of tender rules, sources say.
Its biggest shortcoming is that the company refused to accept the project's “geo-technical risk” and proposed that it would have to assess such risks after a study once the contract was awarded. In that case, Marubeni's proposed price for the project would change after the contract was awarded.
Insiders say Marubeni also refused to accept the responsibility of obtaining the right way for transmission line and its associated costs and declined to accept the required responsibility to guarantee the availability of spare parts for 10 years.
These two issues were allowed to be amended.
Sources say this was done to push out bidders who proposed using GE and Siemens turbines. Mitsui had proposed equipping the plant with a GE turbine and Duro Felguera with Siemens.
Of the two qualified bidders, Marubeni and Sumitomo proposed Mitsubishi Heavy Industries (MHI) and Alsthom turbines respectively. The GE and Siemens turbines are cheaper than MHI and Alsthom both in terms of price and maintenance.