CEB's bid for new gas turbines at Kelanitissa blows a fuse, once again

CMEC says it cannot meet the financing terms

The Ceylon Electricity Board’s (CEB) long overdue tender to design, manufacture, supply, install and commission three 35MW gas turbines at the Kelanitissa Power Station has suffered another blow with the selected party China Machinery Engineering Corporation ( CMEC) saying it cannot meet the financing terms.

When the CEB called tenders early last year, it required bidders to come forward without 100 percent financing on suppliers’ credit basis.

Five companies turned in proposals and the Standing CabinetAppointed Procurement Committee ( SCAPC) decided to award the procurement to a joint venture between Spain’s TSK Electronica Y Electricidad S A and Ceylex Engineering ( Pvt) Ltd ( JV TSK/ Ceylex).

However, after unsuccessful bidders CMEC and China’s Dongfang

Electric International Corporation complained to the Procurement Appeals Board ( PAB), the SCAPC revaluated the price bids. In the meantime, the JV TSK/ Ceylex bid got disqualified when they requested to increase their earlier quoted price.

The Technical Evaluation Committee then recommended the awarding of the contract to CMEC for a price of US$ 104,127,681.52 or Rs. 842,012,363.50.

“However, the Chinese firm, CMEC, has now confirmed that it cannot source 100 percent financing as promised,” authoritative sources said, adding that Dongfang wass likely to be offered the opportunity.

The procurement, which was in the approved long- term generation expansion plan since 2007, had been in limbo for years. The initial procurement process started as far back as February 2016. A project management unit was set up, paying allowances and other benefits to its staff.

But the CEB did not complete the request for proposals document till 2019--and it still did not invite bids.

Instead, in July 2019, a board paper was submitted requesting a higher allocation for the project saying the dollar had appreciated against the rupee, making the turbines significantly costlier to acquire. The period of the project management unit was extended, with all its emoluments for staff.

With the country in a severe power crisis, the CEB Board decided it cannot wait for the project management unit to produce yet another tender. So it instructed the General Manager to submit a proposal to fast- track the process, and to explore alternatives that could be put to use within a shorter time frame as many could wait another three years.

So it was agreed to adopt modern aero- derivative gas turbines that are operational in six months. The project management unit was reformulated and placed under the CEB’s Transmission Division.

The tender was advertised in October 2019 and five bids were received in December 2019. Two bidders-- China National Technical Import and Export Corporation ( CNTIC) and TSK-- were notified that they were shortlisted after technical bids were opened.

But the CEB general manager then said the utility did not have money for the project as the allocation was used to settle urgent dues to t h e C e y l o n Pe t ro l e u m Corporation.

In October 2020, a full year after the tender was published, the Power and Energy Ministry sought Cabinet approval to direct the Treasury to issue a guarantee to People’s Bank for the procurement, or to cancel the initial tender and direct the CEB to issue a new request on supplier’s credit financing basis.

The second option was approved and it was on these terms that the utility had fresh tenders in April last year. However, with the latest development, it would be still more time before Kelanitissa Power Station gets the hardware.