Despite its failure to start the construction work on the 341MW Bibiyana 1 power plant in two years, the Summit Group has claimed $45m in compensation from the government and asked it to return $3m the company deposited as security.
In this connection, on August 20 Summit sent a letter to the secretary of the Bangladesh Power Development Board (BPDB) which was signed by the Director of the Summit Bibiyana 1 Power Company Ltd (SBPCL 1), Jafer Ummeed Khan.
The government had signed agreements with Summit Power under the Independent Power Producer (IPP) in May 2011 to install three power plants, the gas-fired Bibiyana 1 and the 341MW Bibiyana 2 in Habiganj, and the 337MW dual-fuel Megnaghat in Narayanganj, with a combined production capacity of 1019MW.
The simple cycle of the plants were scheduled to start this August while combined cycle production would start in August 2014.
However, the local power company could neither collect any funds nor start the groundwork at Bibiyana 1 and will probably see its agreement with the government revoked, officials said.
Meanwhile, work at Bibiyana 2 is still in the primary stages and so far only earth filling at the project site has been completed.
Though Meghnaghat is expected to go into production this October- almost two months behind schedule- it will burn furnace oil instead of natural gas, which will significantly increase the production cost, Summit officials said.
Following its failure with Bibiyana 1, the government on August 12 last year served the company with a “Notice of Default” and on September 10 of the same year served a “Notice of Intent to Terminate ” the deal. It also told Summit that the government would encash its $3m security deposit.
Though PDB had urged Summit to leave the project earlier, the company did not pay any heed to its calls, rather put the project on hold, taking advantage of their connection to an influential minister, sources said.
Summit, in its August 20 letter, claimed the “BPDB has failed to provide the company with evidence of registration of the land lease agreement by September 12, 2011.”
“The company feels constrained to issue this termination notice of the project agreements for the above events of default. Furthermore, BPDB, as well as other related and concerned parties are held jointly and severely liable to compensate all damages suffered by the company arising out of such breaches, which would be in the region of US$45 million with interest at the Bank Rate of 4 percent till payment of the termination compensation,” the letter read.
It blamed the government for its alleged failure to provide a Partial Risk Guarantee (PRG) of the International Development Agency of $200m as they had represented in the Request for Proposal (RFP) of the project.
Summit also requested the government to release the $3m bank guarantee as soon as possible.
The company claimed that since receiving the letter of intent for the project, “the SBPCL 1 has worked diligently and relentlessly to secure financing for the project and has also executed mandate letters with ADB[Asian Development Bank] and IFC[International Finance Corporation].”
The letter also said that Summit had expected to receive credit approvals from different lenders by January, 2012, a deal which it could not ultimately land.
When contacted, high-ranking officials at Summit did not wish to comment on the issue in the absence of the group’s Chairman, Muhammed Aziz Khan, who is currently abroad.
When asked about the letter yesterday, PDB Chairman Md Abdul Wahab Khan said: “Though we gave several deadlines to Summit for collecting the funds, they could not do so. The claim of the company is not convincing. We are examining their letter and will take necessary steps.”
He, however, declined to make any comments about refunding the security deposit.
