PDB awaits ministry signal to terminate Smithco contract

Power Development Board (PDB), the country's power sector watchdog, is now awaiting the Energy Ministry's signal to terminate the contract with a US-based power company for its failure to abide by the terms and conditions, reports UNB.

"We've already sent our recommendation to the Ministry to cancel the agreement with Smithco and are yet to receive any instruction," a PDB official told UNB yesterday.

He said that the termination of the contract had become inevitable as the Smith Cogeneration failed to pay the fine and sign a supplementary agreement by January 17.

Earlier, the Energy Ministry had asked the PDB to terminate the company if it did not comply with the basic components of the contract.

Smith Cogeneration entered into a 15-year contract with the PDB in October 1997 for the construction of a 100 MW barge-mounted power plant at Haripur near Dhaka within 10 months of the signing.

Under the contract, the company is liable to pay 10,000 US dollar per day as fine for its failure to start work on time. Till January 17, the payable fine and liquidity damage totalled 12 million US dollar.

To cope with the growing power demand, the government in 1996 liberalised the power policy opening the doors for private sector power generation.

The Smithco was the first private sector energy company to get a power generation contract signed with the PDB.

As it failed to start the work within the stipulated timeframe, PDB offered a three-month extension in two phases to facilitate the company to begin its work.

The deadline expired on January 17 and the meeting between the PDB and Smithco that day failed as the US company did not agree to pay the fine and compensation as per the contract.

Meanwhile, work on another 100 MW barge-mounted power plant, initiated by New England Power Company (NEPC), is in progress and is likely to go into commercial production by the middle of this year.

The agreement with NEPC was signed much later than the Smithco.