Power project sent back for \\\'bloated\\\' cost estimation

Nearly 40 per cent of the Tk 25.19 billion funds sought for a proposed power sector project are set to be spent for less-important matters, including purchase of vehicles and foreign training, officials said Wednesday.
Such huge spending of the project money on ancillary things has given rise to questions about proper cost estimation and economic viability of the project, they said.
Power Division officials said the re-powering of the Ghorashal unit-3 project will require Tk 14.45 billion for rehabilitating the existing 210-megawatt plant and adding another 260MW gas turbine (GT) unit while the remaining Tk 10.74 billion for less-important works.
A good portion of the Tk25.19 billion estimated funds has been proposed to be spent on the purchase of vehicle spares, consultancy services, training abroad, interest and service charge, several fee payments to the external financiers, insurance fees, staff salary, payment of tax and VAT, furniture purchase and some other less-important works, said a senior Power Division official.
"If a project involves spending to the tune of Tk 10.75 billion, 43 percent of the Tk 25.19 billion total cost, for the unnecessary or less-important works, it is difficult for a project to be viable?" He said while talking to the FE on condition of anonymity.
The Power Development Board (PDB) has undertaken the project for re-powering the Ghorashal 3rd unit at the existing power station in Narsingdi. It will rehabilitate the ailing 210MW power unit and install a 260MW GT unit.
The power-generation unit will be upgraded with costly buyer's credits at nearly 5.0 per cent interest and paying some other additional fees.
According to the project proposal, the PDB will spend Tk 8.69 billion for setting up the 260MW GT unit, Tk 2.84 billion for rehabilitating the existing 210MW steam-turbine unit, Tk 152.84 million for installing heat-recovery steam generator and Tk 137.67 million for power-evacuation system.
On the other hand, it will spend Tk 1.02 billion for civil works and building constructions, Tk 90 million for local and foreign training for the staff members, 319 million for consultancy and services, Tk 68.2 million for purchasing 24 vehicles, Tk 107.2 million for consultancy services, Tk 571 million for interest payment, insurance, commitment, security agency fees and other related services.
"The existing 210MW-capacity unit-3 of Bangladesh's second-largest Ghorashal power station has had adequate land, necessary establishments, substations, power evacuation and other facilities. But the PDB has again earmarked funds for fresh development of such facilities, which is conflicting with the existing ones," said another government official.
Since the project has already estimated a bloated cost, the state-owned power generator has proposed to purchase 24 vehicles and train its manpower abroad. "It's is misuse of funds," he added.
Meanwhile, the Planning Commission has sent back the development project proposal (DPP) of the repowering of the Ghorasal power unit-3 project in view of the bloated cost estimation and some other inconsistencies in the project.
The PC has asked the Power Division to rationalise the cost of the project and curb inconsistencies to get approval from the government's highest economic policymaking body, ECNEC, sources added.
Meanwhile, the PDB has already signed agreements with the contractor and the credit providers for setting up the power units before getting approval for the DPP.
Power Division officials said the PDB signed deal with Swiss company Alstom and Chinese company CMC on January 12 this year for the re-powering of the Ghorashal 3rd power unit.
The state-owned power generator invited international tender in March 2012.
Besides, the PDB has also selected the Swiss Export Credit Agency (SERV) and the China Export and Credit Insurance Corporation (SINOSURE) for borrowing Tk 20.19 billion ($259.75 million) buyer's credits.
PDB officials said they would borrow from the Swiss lender SERV at 2.15 percent plus six-month LIBOR rate and from the SINOSURE at 3.50 percent plus six-month LIBOR rate for the Tk 20.19 billion credit for the power unit repower project at Ghorashal.
Besides, the government has to pay 1.0 percent commitment fee, 1.0 percent agency fee and another 1.0 percent structuring fee for the credits, he said.
In addition, the government will have to pay US$25,000 as the security agency fee and $600,000 as guarantee processing and application fees to the World Bank's Multilateral Investment Guarantee Agency (MIGA), he added.
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