Smith Co likely to face termination of contract

A foreign power company is likely to face termination of contract as they could neither pay the fine for failure to begin work on schedule, nor sign supplementary agreement with the Power Development Board till Monday, reports UNB.

PDB is considering cancellation of the agreement signed with US-based Smith Cogeneration for a 100-MW barge-mounted power plant at Haripur, near Dhaka.

PDB asked Smith Cogeneration to pay 8.5 million US dollar as penalty and another 3.5 million dollar as liquidity damage latest by Sunday (January 17), and extended the deadline by one more day to give the US company a last chance.

"But they haven't yet fulfilled the conditions. We're planning to forward a letter to the Energy ministry recommending cancellation of the contract," a PDB official said Monday afternoon.

According to the Energy ministry sources, they had earlier advised the PDB to cancel the contract if the company did not comply with the terms and conditions of the original contract latest by January 17.

"As talks failed on January 17, we gave them another chance to let us know their stand by 9 am Monday (Jan 18). But instead of coming to terms, they came up with new proposals which are not acceptable," said the PDB official.

According to the original contract, the US company is liable to pay fines of 10,000 US dollar per day for failing to instal the plant on schedule.

The Smith Co neither paid the fine, nor signed any supplementary agreement to continue the work.

They have already enjoyed a three-month extension but are yet to start the work.

On October 14, 1997, PDB signed a 15-year agreement with Smith Cogeneration (Bangladesh) Pvt Ltd, a fully-owned subsidy of Smith Cogeneration International of USA, to instal a 100 MW barge-mounted power plant at Haripur near the capital city.

The project was scheduled to be implemented within 10 months of signing the contract.

It was one of the four barge-mounted power projects in the private sector approved by the government to feed the country's National Grid amid rising demands for power.

A senior PDB official told UNB Monday night that the Smith Co might have lost interest in the project.

"Right now we've no option but to recommend cancellation of the agreement," he said.

The first barge-mounted power plant in the private sector started commercial production in Khulna in October last year.

Another foreign company, New England Power Company (NEPC) with its Bangladeshi partners, already began construction of another 100 MW barge mounted power plant at the same site at Haripur. The plant is scheduled to start commercial production by April this year.