A letter issued recently by Dr. B.M.S Batagoda, Secretary to the Ministry of Power and Renewable Energy, to the Procurement Appeals Board (PAB), about the bid submitted by Lakdhanavi Limitedfor 300MW Kerawalapitiya LNG power plant has stirred a hornet’s nest.It is reported that theSecretary has touched a sensitive issue by criticizing the credibility of some of the leading financial institutions which come forward to finance a big infrastructure projects in the country, has dumfounded the international banking community andthe diplomatic circles.
Tender for 300MW Kerawalapitiya LNG power plant was floated in November 2016 and was awarded to the lowest bidder, Lakdhanavi Limited, upon evaluation by a 13 member Technical Evaluation Committee (TEC) and finally by Standing Cabinet Appointed Procurement Committee (SCAPC). However SCAPC decision was subsequently reversed by PAB based on appeal made by second lowest bidder, GCL China,primarily based on the said letter of the Secretary. Lakdhanavi in its bid has included financing proposals from international lending institutions such as kfW of Germany and Asian Development Bank.
The Secretary, in his letter to PAB has questioned the credibility of world recognized financial institutions includingkfW IPEX Bank of Germany (ranked no. 1 as the Safest Bank in the World) which is known to be one of the leading global Project Financing Institutions. The following observations have been made by Dr. Batagoda on “kfW IPEX Bank” which are presented in terms of Excerpts.
“In this Bid, Lakdhanavi has reported to this Bank kfW, the total project cost as USD 330M. However, in the final bid, Lakdhanavi has stated that the total project cost is USD 175Mn. When the Procurement Entity clarified from their Bank, The bank has stated that even at the cost of USD 175Mn, they can fund the project of USD 330Mn.”
“According to these conflicting information of Lakdhanavi Ltd, their financial Advisor and their Bank, this project can be completed at the cost of USD 330mn as well as at the cost of USD 175mn.This raised an issue on credibility of not only about the bidder, but also on their Banks as well as the Financial Advisors on their recommendations on the Financial Proposal.”
Experts in energy sector criticize above comments citing lack of Secretary’s knowledge on the subject and going further for his intensions on purposely mixing up untruths to mislead PAB. According to them, it is customary to initially indicate higher project cost and get commitment from financial institutions for higher debt financing facility. Higher commitment reflects the confidence the bank had on the project and about Sri Lanka. However Ministry sources said that kfW has clarified to Tender Board in response to clarification later that they were aware that the final bid tariff was based on a lower project cost and confirmed their commitment to finance the project at lower cost of 175mn USD. The Secretary has forgotten to mention about this in his letter.
Experts further say issuing of this kind of statements by a responsible government officer is believed to create serious disturbances amongst international financing institutions, especially during a time when the country is struggling to attract the much needed Foreign Direct Investment (FDI).
(sources)
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