Setting up of Rental Power Plant getting delayed!

Arun Karmakar- Translated from The Daily Prothom Alo dated 11.11.2009

The steps taken by the government to establish rental power station for
immediate solution of power shortage, it has become a doubt about its
execution. The first reason is, most of the participating company in the
tender has lack of previous experience in setting commercial power
station. Besides these, there are uncertainty about arranging fund, fuel
collection and poor fuel supply infrastructure and doubts on getting huge
amount of subsidy for these rental power projects.

The main goal to establish these power stations immediately is to fill up

the increased demand of electricity in the upcoming harvest season and
for and next summer season. But in the present situation it has become a
doubt about the success of this attempt.

1. Tender: From the concerned source of Government it is known that

previously, there was no chance to participate in the tender for the
inexperienced company to establish commercial power station. But with
the influence from a quarter, the Government has given the scope. Now in
the review of the tenders, PDB is facing various types of problems. As a
result, by calling meetings again and again during the last 12 days, it was
not possible for PBD to complete the evaluation process of the tender
applications.

A total of 63 companies have submitted tender application to setup these

power stations. Among them, only few companies have experience in
setting up commercial power stations. There was a decision to sign the
agreement of establishing eight power stations within 30 November,
2009.
We came to know that among 63 companies; only Summit Power, AgraCo,
Asian Antech, Otobi Limited, Energy Prima, Shahjibazar Limited has prior
experience in setting power stations, while others do not have any. But
the representatives of some company said, following the relaxed
conditions it is not essential to have prior experience.

2. Funding: Second reason is funding. For establishing eight power

stations of total 530 MW, an amount of approximate 2100 crore taka
investment would be needed. To attract this investment, Government
arranged meeting with state-owned and private companies and also with
international banks and financial institutions. But till now, there is no
surety to get even half of the required amount. Only the Managing
Director and Chief Executive of Infrastructure Development Company
Limited (IDCOL), Islam Sharif ensured that they are ready to invest
approximate Tk. 400 crore. Some other banks have started to discuss
through consortium investment. But even after counting all these it would
not be more than 1000 crore taka.

In a program about this issue, the Finance Minister, Abul Mal Abdul Muhit
told the journalists that there will be no shortage of fund for this sector.
The fund would be arranged from Public-Private Partnership (PPP),
Government’s own source and other Institutes interested to invest in
power sector. But till now, planning of PPP is not finalized. Moreover,
Government not yet take any clear regulation for this PPP investment.

Three main donor agencies for power sector; The World Bank, Asian
Development Bank (ADB) and Japan International Cooperation Agency
(JAICA) promised to invest in the sector, none of it has been fulfilled during
the last 10 years till today. Approximate six projects (Siddhirgonj 300 MW,
Haripur 300 MW, Bibiana 450 MW, Sirajgonj 450 MW, Meghnaghat 450
MW) are stuck in various conditions. After taking charge by the present
government, Ministry of Power has started communications with the
Donors Agencies regarding the aforementioned power projects. But the
donor agencies have not discussed with the government about the new
projects, only the exception is the concern of World Bank and German
Cooperation (GTZ) about the power saving lamp project.

3. Time: The third doubt is about implementation time/schedule.

According to the terms of tender, the stations operated by diesel should
be started within 120 days of contract signing i.e. within 31 st March, 2010
and the stations operated by furnace oil should be started within next 270
days of contract signing.

But some expert entrepreneurs said to Prothom Alo that it is not possible
to start production within this time frame. According to the terms, if the
entrepreneurs fail to start producing power within this time frame, then
they have to pay USD 500.00 per day for each MW of elcetricty as
liquidated damages. The six rental based stations that started to set-up
power stations during the last caretaker government regime, two among
them have not completed yet. The issue for collecting liquidated damages
is not settled yet.

But the Chairman, Power Development Board (PDB), Mr. A S M Alamgir

Kabir said to Prothom Alo that it was decided that the entrepreneurs
would finalize all the processing with the concerned companies so that
they can commission the plants immediately after getting the Work Order.
Those who have finalized these processing can complete the job in time.
The Review Committee is now evaluating these issues. However, it is
known from a reliable source that most of the entrepreneurs have not
completed the pre-arrangement before taking part in the present tender.
4. Fuel: The fourth doubt is about the matter of supply of fuel to these
power stations. More than 600 Metric Ton fuel (diesel and furnace oil)
should be supplied but how the funding would be arranged is still not
confirmed.

When asked about this to Mr. A S M Alamgir Kabir, Chairman of PDB, he

informed Prothom Alo that they are considering the matter of supply of
fuel with utmost priority. And the matter of giving subsidy would be
calculated and submitted to the Ministry of Finance soon.

Other important issue that Government & non government sources

concerned about is that these rental power stations are not established
under any direct specific government regulations and as such, the
matter of purchasing electricity by PDB from those stations would arise
question on legality. In the past, any power stations established under
private sector have been done under separate regulations.

5. Eight Stations: Among the eight rental stations, four would be diesel
operated and will be located at Veramara 100 MW, Thakurgaon 50 MW,
Sayedpur 50 MW and Rajshahi, Katakhali 50 MW. Other four furnace oil
operated station would be established at Noapara 100 MW, Narayangonj,
Madangonj 100 MW and two 30 MW stations each at Barisal and Jamalpur.