Dutch firm takes $25m for 8yr redundant service, seeks another $28m for future
Sharier Khan
The Rural Power Company Ltd (RPCL) is faced with the dilemma of respecting a very costly and redundant 15-year power plant service contract with a Dutch company that was signed on the basis of a secret and unsolicited negotiation in 2001.
The first phase of the two-part contract ended in October 2008. As dictated by that contract, the RPCL is now considering the second phase of this deal titled Long Term Service Agreement (LTSA) with Dutch company TTS.
As per the deal, between 2001 and 2008, Dutch company Thomassen and Turbine System (TTS) charged euro 12.036 million and $ 9.58 million –or around $ 25 million in total– for inspection of RPCL’s power units and provide repair services and refurbishment of parts.
After October last year, TTS submitted its proposal for the second phase of service for 2008 to 2015. It sought a cost of euro 12.66 million plus $ 11.59 million (or around $ 28 million in total). As the amount seemed very high, the RPCL board decided to check the market trend of LTSA and found two price offers from two other service companies — one demanding euro 15.7 million and another euro 9.8 million.
“We have not taken any decision on this matter. Our board will decide the next course of action,” said a high official of the RPCL, a company owned by the Rural Electrification Board (Reb).
An LTSA contractor’s job is to inspect gas turbines of the power plant after 8,000 hours of operation, conduct Gas Inspection after 24000 hours and Major Inspection after 48,000 hours. In addition, the LTSA contractor will respond to any problem of the plant within 48 hours of notice.
“No other power plant in the country has ever needed any such contract,” notes a source.
The PDB that operates dozens of plants deploy its own engineers and technicians for plant inspection. If required, the PDB hires foreign consultants through open tenders. Private power companies in the country also do not use LTSA to run their plants.
That the contract was redundant and a mechanism to drain out hard-earned money of the company is clear as it was signed when the RPCL already had a 15-year operation and maintenance contract with Lahmayer International Pally Power Service (LIPPS) from 1999 to look after RPCL’s two-unit 140 megawatt (MW) power plant.
Now ousted and sued, LIPPS was also given the O&M contract on the basis of an unsolicited negotiation. Each year it drew Tk 27 crore till 2005. Now the same job carried out by the RPCL staff costs a mere Tk 5 crore.
The RPCL in late 2007 added another 70 MW power unit, built at an astonishing cost of euro 120 million by German company Siemens, again under an unsolicited deal in early 2005. The chief of LIPPS pushed this deal.
Siemens is now facing international charges for bribing ex-prime minister Khaleda Zia’s son Koko and officials for power contracts in Bangladesh.
The nature of various such unsolicited contracts officially surfaced when the government in 2006-07 reconstituted the RPCL management, giving it a mandate to clean up its operation and end the reign of massive irregularities.
The RPCL has now streamlined a lot of irregularities, but it is still burdened with agreements that were imposed on it by a corrupt nexus headed by LIPPS. LIPPS was aided by its German parent company Lahmayer that served as RPCL’s power project consultant till two years back.
“The problem with the LTSA deal is that we have signed it and we have some obligations to respect it,” said an official. He mentioned that Mymensingh plant needed LTSA since it no longer had any O&M operator, and the RPCL did not have adequate high quality staff to run the show.
“We are recruiting people and once the staff become a bit experienced, they take jobs abroad and leave us,” said an official describing RPCL’s dilemma with the LTSA.
The contract with TTS gives the RPCL a scope to ‘negotiate’ the second phase. This prompted the RPCL board to seek price offers from a handful of LTSA companies. “Its not an open tender,” the official added.
Letters were sent to Alstom Switzerland, Bhel GE India, Siemens AG Germany, Wood Group Thailand and MJB UAE in November last year. Only Wood Group and MJB responded.
The Wood Group sought euro 15.7 million and MJB euro 9.83 million, clearly showing that TTS was heavily overcharging for its services.
“Personally, I am in favour of an open tender for such a costly job. But it will be up to the board to decide the next course of action,” he said, adding that the decision process might take two to three months.
The root of such a service contract appears to be linked with the chief of LIPPS, Captain AZ Rezaul Haq, sources said.
Reza has been found responsible for a series of costly unsolicited contracts, and is accused of heading a nexus of corruption in the RPCL till 2005.
The LIPPS was formed in 1999 with 35 percent share belonging to the RPCL and the remaining to Lahmayer International of Germany, which was locally represented by Reza. But he had acquired all the German shares without board approval or government’s knowledge and acquired the RPCL shares in 2005 using his influence on the RPCL chief.
This led to a conflict, and ultimately Reza fled Bangladesh, sued the RPCL at a Singapore arbitration court and won the case unilaterally. But the verdict could not take effect as the RPCL has challenged it in a Dhaka court.
Still absconding, Reza is facing multiple cases filed by the RPCL for sabotaging its Mymensingh power plant back in August 2005.
Reza controlled RPCL’s power project consultant Lahmayer International as its local agent from the nineties. He also represented Siemens and Alstom power companies that installed Mymensingh power units. Again, Lahmayer was appointed RPCL’s consultant on the basis of unsolicited negotiation.
Courtesy: thedailystar.net
