The government initiatives to implement various power projects are going slow due to a host of issues including moving to dual-fuel plants from gas-fired plants and a ruling party man's bid to grab power deals.
So far the Power Development Board under the Awami League government forwarded two public sector power projects, upon selecting the lowest bidder, for approval of the cabinet's purchase committee.
Earlier, the government floated tender processes for the 450 megawatt power plant in Bibiyana, a 300MW plant in Siddhirganj and a 150MW plant in Khulna but it is taking a long time to complete these processes. The government is set to float tender for another 150MW project in Sirajganj next week.
According to sources in the PDB and the power ministry, one of the reasons for taking such a long time for these power projects was non-availability of natural gas. As Petrobangla could not confirm gas supply to all the planned power projects, the government took some time to take steps that would ensure the future power plants do not sit idle even if Petrobangla fails to provide gas.
The solution was making all the future power projects dual-fuel plants--natural gas and petroleum fuel.
While dual-fuel plants make a power project costlier by at least 10 percent, the government realised upon processing the tenders that it needed to create the infrastructure for supplying and storing alternative fuel for the plants spending additional funds.
"The other issue that is slowing down the tender processes is the undue influence of a powerful ruling party man over some officials of the PDB, the Electricity Generation Company of Bangladesh, the Power Cell and North-West Power Generation Company Ltd. He is representing almost all the Chinese power companies and wants different authorities relax various tender terms to accommodate bids of these Chinese companies," said an official.
Big, small, experienced or inexperienced, Chinese power companies have a general tendency not to fully comply with tender requirements, he adds.
"Either they do not understand the tender terms and conditions or they trivialise the processes because they are backed by someone with political connections," the official notes.
This is reflected in the tender processes of two power projects that are currently awaiting the government nod. These are the Chandpur 150MW combined cycle power project and the Sylhet 150MW gas turbine power project.
Both the projects were awarded to two Chinese companies that are represented by the powerful ruling party man.
Chinese company Harbin previously won the Chandpur project but it was cancelled during the last caretaker government's rule when it wanted to increase the project's budget. Now the project has been awarded to China Chenga Electrical Ltd with a target to have it commissioned by December 2011.
China Chenga is an obscure power company with no experience in installing a power plant in foreign countries.
Experience is a key factor in successfully completing a power project as per schedule. However, the government has been since 2001 prioritising low cost over experience and reputation, consequently Bangladesh has been having bitter experience in the power sector as the bidders are failing to deliver a plant as desired.
The Sylhet project has been awarded to Shanghai Electric Company even though its bid documents were highly irregular and a number of vital machinery offered by it are not backed up with proper performance guarantees. Although Shanghai Electric Company is a big power company with a long history, the bid documents do not show enough experience to justify awarding the project.
"But we have okayed this bid anyway because it is the sixth tender and we cannot afford to waste anymore time with this project," said a top PDB source.
The PDB forwarded its recommendation on the Chandpur project to the ministry two weeks ago and for the Sylhet project last month. The ministry is now holding the recommendations back before forwarding them to the purchase committee. This delay is making the PDB anxious.
Meanwhile, a letter from the World Bank to the Economic Relations Division and the Electricity Generation Company of Bangladesh (EGCB) informed them of German power plant equipment manufacturer Siemens' decision to restrain itself from taking part in World Bank Group financed projects till December 31, 2010. The WB following allegation of corruption is now investigating Siemens.
Almost all the Chinese power companies bidding in Bangladesh use Siemens equipment.
The July 29 letter has made the EGCB nervous about its WB financed Siddhirganj 300MW power project. In April, the EGCB floated the tender for this project in which eight companies submitted financial and technical bids. These include four Chinese companies, an Indian company, an Indo-German joint venture company, a Korean and a Spanish company.
The read-out price offers of these companies ranged between $190 million to $270 million but the real price offers can be understood once the evaluation of the bids are complete.
The EGCB would have completed its evaluation by now but following the WB letter it sought advice from the ministry. The ministry asked the EGCB to complete its evaluation first. EGCB is expected to complete the evaluation process this week.
The tender for the Khulna 150MW power project, being financed by the Asian Development Bank under the North-West Power Generation Company Ltd, was floated on June 30. Seven power companies, including five Chinese, submitted their technical and financial bids for the dual-fuel plant.
The consultant for the Khulna project has serious difference of opinion with the North-West authorities over the bid criterion. The authorities prepared the bid criterion relaxing experience and other clauses that appear to favour exclusively Chinese companies using Siemens equipment. The consultant believes that such a bid would not produce good results.
This tussle has slowed down the bidding process, sources said.
The Power Cell of the power ministry initiated the re-tender for the Bibiyana 450MW power project in April 30. Several power companies submitted pre-qualification documents and the cell was expected to announce the list of qualified companies for the bid by late May or early June.
However, as such a large project needs investors' confidence, the government decided to involve the World Bank in the project and requested WB to provide technical and legal consultancy. The bank responded to the idea by saying that the tender should be re-initiated from the beginning with the WB having the consultant's role. The government requested the WB to be involved with the evaluation process saying that re-initiating the tender would delay the process even further.
The Power Cell then wrote to WB formally requesting technical and legal support to which it replied that such a request should come from the ministry. After a delay of one month this letter was finally forwarded. The WB informed the government Thursday that it has agreed to the proposal.
The pre-qualification documents for the Sirajganj 300MW power project will be submitted on August 27.
Meanwhile, the government is making huge preparations for more power projects so that by the time the Awami League faces the next elections, the country does not have any more load shedding issue, sources pointed out.