The government is likely to cancel a major power plant deal with an Indian contractor because the company failed to deposit the security money.
Haryana-based Lanco Infratech Ltd was supposed to deposit around $3m as a performance security deposit (PSD) by July 15 against a letter of intent (LOI) from the Bangladesh government for building a 367MW dual energy power plant in Sirajganj.
In the meantime, Singapore-based contractor Sembcorp has sent a proposal to build a gas-based power plant at the same location.
The proposal letter, signed by Sembcorp’s Executive Vice-President Tan Cheng Guan, was recently sent to State Minister for Power Nasrul Hamid. The junior minister then forwarded the letter to the director general of Power Cell, recommending that he take steps.
An official of the government’s Power Division said it would have been the biggest power plant building deal with an Indian company based on the production capacity.
“We are seeking permission from the Power Division to cancel the LOI and make a move to bring the security money [that Lanco was supposed to deposit],” said CFK Musaddeq Ahmed, a director of Power Cell – a concern of the Power Division.
Existing rules suggest that when the government issues an LOI to a company for any contract, the company must pay a performance security deposit within a stipulated time. In case the PSD payment deadline cannot be met and the deal is cancelled, the company must still pay the money to the government as a form of compensation.
“The company was supposed to come up with the PSD on July 15; but it missed the deadline. The company then sought more time to submit the PSD...The government is going to make a decision in this regard very soon,” Musaddeq said.
Mohammad Hossain, director general of Power Cell, told the Dhaka Tribune: “After receiving [Sembcorp’s] proposal, we are now thinking about how we can move forward.”
Power Cell is supervising the project for building the 367MW power plant in Sirajganj.
Sources said the Indian company could not make the security deposit in time because of a financial crisis. In fact, the company had to shut down some of its major power plants at home and abroad because of the crunch.
On March 28, 2013, Lanco signed an initial agreement with Bangladesh for a power and gas purchase-sale on the proposed 367MW Sirajganj dual-fuel power plant, which was supposed to start commercial operation in mid-2015.
On August, 2012, the Cabinet Committee on Government Purchase approved the Indian sponsor’s offer to implement the project as an independent power producer (IPP) on a build-own-operate basis.
Earlier, Lanco was awarded another project for building a 214MW plant in the southern district of Bhola. However, after the contract-signing, the company sought relocation of the plant from Bhola to Sirajganj and proposed setting up a dual-fuel power plant instead.
According to the minutes of a June 1 meeting of the Large Power Plant Implementation Committee, a decision was made to hand over both the projects to the state-owned North-West Power Generation Company.
