Uncertainty over Khulna plant

The launch of a "dual fuel" 150 megawatt power plant in Khulna is uncertain as the government and the project financier are holding opposing views about evaluating the lowest bidder of the 20-month-old tender.

The North West Power Generation Company (NWPGC) that floated the tender for the peaking power plant in March last year marked Chinese company Shandong as the lowest bidder among four participants.

But project financier the Asian Development Bank (ADB) found flaws in NWPGC'S bid evaluation related to a vital peaking power plant component called Hot Gas Path Inspection (HGPI), which is required for quick start of the plant.

If ADB's instruction is applied to properly evaluate the bid by adding the cost of HGPI to other cost outlays, the lowest bidder turns out to be Spanish company Isolux.

The plant will have the capacity to run on both gas and diesel to ensure undisturbed power generation in case of gas crisis.

But NWPGC is reluctant to award the contract to Isolux. If Isolux is given the job, the upfront cost of plant construction would be higher than that of Shandong by $56.5 million, it argues.

However, most part of this extra fund will have to be arranged by the government, the co-sponsor of the project.

The NWPGC notes that the per kilowatt power generation cost in the two-decade plant life of Isolux is the lowest with Tk 5.63 lakh, while that of Shandong is the fourth lowest with Tk 5.69 lakh.

This means, in the long run, NWPGC will gain significantly from Isolux's plant, which achieves lowest price by giving the most efficient equipment, among others.

"This implies a huge difference in cost -- about Tk 6,000 per kilowatt between Isolux and Shandong. That means the cost difference between Isolux and Shandong would be around Tk 6 lakh per megawatt," says a source.

Isolux's plant will generate 158 MW power, while Shandong will produce 142 MW.

As per the bid evaluation criterion, NWPGC is supposed to evaluate the lowest bidder on the basis of per kilowatt power generation cost, not just the plant construction cost.

The NWPGCL on September 23 wrote to the ADB that Isolux's cost of project is $160 million, while Shandong's is around $114 million.

Shandong's project cost is close to that of the Sirajganj 150 MW peaking power project, which is also funded by the ADB and has been awarded to another Chinese company on October 12.

The NWPGCL argued in favour of awarding the deal to Shandong on ground that the government would have to bear additional cost if it is awarded to Isolux.

Sources say the local "unofficial" representative of the Chinese company, a powerful ruling party man, has convinced a section of the government not to accept this evaluation as awarding the job to Shandong would save the government a lot of money upfront.

"That means if he can't get this tender, nobody else would bag this job," comments an official.

Another power tender for a 300 MW plant in Siddhirganj had to be cancelled a couple of months ago because of the dubious role of the same person.

To avoid the ADB's evaluation instructions, the power ministry, through the Economic Relations Division (ERD), late last week in a letter to ADB sought to relocate its financing for the Khulna project to the Sirajganj 150 MW one.

The ADB is financing $110 million for both these projects under one package.

The NWPGC on October 12 signed an agreement with a Chinese company CMC for the Sirajganj project at a cost of $110 million, of which ADB is giving $54 million. The government is supposed to finance the rest.

The remaining ADB fund of $56 million is expected to be pumped into the Khulna project.

In this context, the power ministry has asked to divert the remaining fund to the Khulna project, while the Sirajganj project would be funded entirely by the government.

If the ADB accepts this configuration, NWPGC will go ahead with its own evaluation and award the contract to Shandong, as the ADB would not have any say on this tender. If ADB refuses, the tender is likely to be doomed.

Power Secretary AK Azad told The Daily Star though the ERD had issued the letter, he called up the ADB office asking them to ignore it for now.

"Right now the ADB is reviewing the NWPGC'S observations on the two evaluations. We are not willing to change the [original] evaluation. If the ADB agrees, we'll proceed with the present financial arrangement and not seek diverting fund for the Sirajganj project," he said.

"If the ADB insists on evaluating price by loading the HGPI component, the evaluation will change," he added.

The government has planned a total of 11,000 MW worth of new power generation during its tenure. Of the target, it has already signed deals for over 2,500 MW power generation.

A large part of these projects will be funded by the government.