Questions over huge coal deal
Ministers this week deferred a Cabinet paper to procure coal for the Lakvijaya plant at Norochcholai after questions were raised about the manner in which a Singapore-based company was chosen for the tender.
“No decision was taken by the Cabinet,” Power and Ener- gy Ministry Secretary M.M.C. Ferdinando said. “The decision was postponed for next week.” Authoritative sources said there were concerns about how five out of six companies that bid for the contract were dismissed, leaving a single firm —Swiss Singapore
Overseas Enterprises Pte Ltd —to secure the deal.
When the Cabinet met on Wednesday, one of the papers submitted for approval was titled ‘Procurement of coal for uninterrupted operation of all three power plants of Puttalam Coal Power Project of 900MW’. It was signed by Power and Energy Minister Pavithra Wanniarachchi.
The paper said that present stocks were sufficient to meet the operation of the 600MW (two units) Lakvijaya Coal Power Plant up to September 21, 2014. A third unit is scheduled to be inaugurated shortly and this would result in stock levels going down three weeks earlier – that means at the end of this month.
In January, Cabinet approval was granted for international competitive bids to buy the coal. Notifications were published in April by the Lanka Coal Company, which is the coal procurement arm of the CEB. Six bids were submitted.
Two companies —Noble Resources International Pte Ltd and Macquarie Bank Ltd — were rejected on the basis that their bid security was valid only till 2014 and not till 2017 as specified. Trafigura Pte Ltd was rejected because it did not have sufficient experience.
Kolmar Group AG was not chosen because it had not agreed with the terms and conditions of the letter of bid. JV of Liberty Commodities Ltd and Uttam Galva Steel Ltd (a partnership) was rejected because one of the partners did not have the required liquid assets.
The Cabinet paper says that Swiss Singapore Overseas Enterprises Pte Ltd was selected because it had complied with requirements “with minor deviation”. The deviation is not mentioned. The price it has quoted for 1,125,000 metric tonnes of coal is US$ 77.50 per metric tonne.
Mr. Ferdinando said it was not known what prices the other companies had offered. “The Tender Board has no authority to open the financial proposals of the others,” he explained.
The process went through both the Technical Evaluation Committee and the Standing Cabinet Appointed Tender Committee. After they were notified of the decision, however, four of the unsuccessful bidders made representations to the Procurement Appeal Board. The PAB’s recommendation is due to be submitted directly to the Cabinet.