BPDB yet to respond to Summit's allegation of damaging $45m

FE Team | Published: September 21, 2012 00:00:00 | Updated: February 01, 2018 00:00:00

FE Report
State-owned Bangladesh Power Development Board (BPDB) is yet to respond to the Summit Group's allegation against it over breaching of project agreements of 341 megawatts (mw) Bibiyana-I power plant project, a top official said.
The sponsor of the independent power producer (IPP) project, Summit Bibiyana Power Company Ltd, had served a notice in mid-August saying BPDB has caused damage worth US$45 million to the project sponsor.
State-owned Power Grid Company of Bangladesh (PGCB) and the Power Division were also accused in the notice.
Summit had sought measures from the parties to cure the default within 30 days.
In the notice summit also pointed out that the government should take all measures to make the partial risk guarantee (PRG) available for the project.
Officials said the BPDB had inked land lease agreement (LLA) with Summit Bibiyana-I Power Company Ltd on May 2011 and as per the agreement the BPDB was to provide Summit the evidence of registration of the LLA within 120 days of project effective date.
Till date BPDB has not registered lease agreement, Summit alleged.
"This constitutes a material breach of the LLA and such is the BPDB event of default under the LLA pursuant to section 7.2 (a)(ii)," Summit's Bibiyana-I power company alleged.
It also constitutes a breach of section 5.1 of the implementation agreement wherein the government has undertaken to procure performance by BPDB of its obligations under the LLA in accordance with the LLA provisions, it alleged further.
"Till date, the company has already invested $11 million for development of the project and continues to incur losses in its quest to secure finance for implementation of the project," Summit said.
The project sponsors had participated in the bid for Bibiyana-1 project on the basis of their evaluation of the economic viability of the project at the time of tender, it pointed out.
Immediately upon receiving the letter of intent (LoI) for the project the sponsors took every measure to secure financing for the project and to that end worked diligently for the progress and implementation of the project, the notice stated.
By August 23, 2011 the sponsor company had executed mandate letters with Asian Development Bank and International Finance Corporation for the required debt finance of the project.
A common lenders' meeting was also held on September 5, 2011 with participation by ADB, IFC, World Bank, Infrastructure Development Company Ltd (IDCOL), IDLC Finance and Bangladesh Bank for creation of Investment Promotion and Financing Facility (IPFF) followed by circulation of a common terms sheet amongst the lenders.
Since the execution of the project agreements, government and the BPDB have failed to meet their obligations as contained in the representations set out in the request for proposal (RfP) of the project as well as its undertakings as embodied in the project agreements, the sponsor of the project has not been able to make progress with the implementation of the project, the Summit notice stated.
Due to the inability of BPDB to register the LLA in favour of the project sponsor till date, along with the delay of grant of the easement right and right of way on the 26 acres of land and further due to occurrence of the political 'force majure' event, resulting in the suspension of multilateral funding in infrastructure project in Bangladesh, the company can no longer hold the engineering, procurement and construction (EPC) contractors to their prices, Summit said.
With each passing day the cost for implementation of the project is rising and the project is 'economically unfeasible', it added.
"Finally, on August 5, 2012, BPDB handed over the above right of way after a delay of 11 months. Meanwhile, as a result of the delay, the EPC price has experienced an escalation of the cost in the region of $100 million," Summit claimed.
The government contracted out Bibiyana-I power plant project to the consortium of Summit Industrial and Mercantile Corporation (Pvt) Ltd and GE Energy LLC of the USA on May 2011.
The simple-cycle power plant of Bibiyana-I power plant was set to initiate electricity generation within 24 months and the combined cycle plants within 36 months of signing the agreements.
The BPDB has inked deals to purchase electricity at a 'levelised' tariff of US cents 3.3220 per unit (1 kilowatt-hour) from 341mw Bibiyana-I power plant.