Rental terms revised

Ministry relaxes power project implementation period, but sticks to hard penalty provision
The energy ministry yesterday finalised some terms and conditions for upcoming tender on eight rental power projects with a total capacity of 530 megawatt, relaxing the deadline for implementing the projects.
The ministry however has kept the option for strong penalty against contractors for failing to launch power plants in line with the contract.
A ministry meeting, chaired by State Minister for Power and Energy Enamul Haque, set the timeframe for implementing four diesel-fired rental power plant projects within 120 days of signing of the agreement and the other four heavy fuel oil (HFO)-based plant projects within 270 days against the previous practice of 90 days and 180 days.
Prime minister’s energy Adviser Dr Towfiq-e-Elahi Chowdhury was also present.
The relaxation came as local influential businessmen mounted pressure on the government to give power plant developers more time.
The ministry also extended the period of operation of the rental plants to five years from three years following the demand from local businessmen.
Experts say prolonged purchase of power from rental power plants will jeopardise payment capacity of Power Development Board (PDB) as the prices of rented power can be two to three times higher than that of conventional power plants.
A bidder must have past experience of developing a 30-MW rental or independent power project (IPP) to qualify for a 100-MW bid. This means bidders without any experience will not be entertained although some local lobbyists were putting pressure on the PDB to entertain such bidders.
Despite pressure from lobbies to ease penalty clauses for bidders’ failure, the ministry decided to maintain the provision of slapping on contractors a fine of $500 a megawatt for each day’s failure in launching power plant.
The ministry has also kept a provision for termination of contract if a bidder fails to complete its rental power project after three months of the deadline.
The bidders will deposit bid bond at a rate of $5000 a megawatt.
The meeting however could not decide on several vital issues including whether the bidder should own power plant equipment instead of making a promise to purchase those, whether the bidder should handle the fuel itself instead of the PDB and whether a bidder will be allowed to sign multiple rental power contracts.
The issues are likely to be finalised at a meeting today in the form of Request for Proposal (RFP) for the tender, sources said.
The PDB will float tender for the rental plants on September 10 with a target of awarding the contracts by November 19 this year.
The rental plants are: a 100-MW diesel-fired plant in Bheramara and three 50-MW diesel plants in Rajshahi, Thakurgaon and Syedpur. At the same time there will be two 100-MW HFO plants in Madanganj, Jessore, a 50-MW HFO plant in Barisal and a 30-MW HFO plant in Jamalpur.
The PDB has proposed setting up these eight rental power plants to be implemented by mid-2010.
Four large 500-MW coal-based power projects are also expected to be implemented by 2013.
Sources said the ministry and the PDB are facing tremendous pressure from the business lobby that wants to have all power projects whether they qualify for the job or not.
Two previous governments between September 2006 and April 2008 awarded four rental power contracts for a total of 167 megawatt to inexperienced local companies for a 15-year term. Of them, one failed to launch its 51-MW plant.
Last year, the caretaker government awarded eight more three-year rental power contracts except one to local inexperienced companies. Of them, four managed to launch operation while the rest with a total capacity of 180 MW failed to start operation as per the schedule.
Power Secretary Abul Kalam Azad, Energy Secretary Mohammad Mohsin and PDB Chairman ASM Alamgir Kabir, among others, were present at the meeting.

Courtesy of The Daily Star