News
Coal stock position affected by rough seas, disputed tender
Unloading of coal at the Lakvijaya power plant in Norochcholai has been hampered by rough seas, worsening an ongoing delay in replenishing stocks caused by a disputed tender.
The power plant should have received a fresh consignment of coal by mid-September. However, differences over the awarding of a lucrative multibillion rupee contract to a company named Swiss Singapore Overseas Enterprises (Pte) Limited led to an interruption. To make up for lost time, the Lanka Coal Company (LCC) made two separate spot purchases of coal.
While the first vessel arrived with 165,000 tons earlier this month, only 21,000 tons of coal have so far been unloaded. Rains, high winds and choppy seas are hindering the process. The delay had forced the Ceylon Electricity Board (CEB) to scrape every last bit of coal from the yard to keep the power plant’s three units operational, an official source said.
A second ship has also now arrived and is waiting to unload its coal. This cannot be done until the first vessel is emptied. This could result in demurrage payments having to be made. CEB General Manager C. Wickramasekera brushed away concerns of any major interruptions to power generation at Lakvijaya.
“Unloading was suspended from yesterday,” he told the Sunday Times. “They cannot operate the barges. But we have unloaded some of the coal. We are now approaching the calm season. The seas are rough because it’s the transition.”
“A ten-day delay is not a problem,” agreed B.B.S. Batagoda, Secretary to the Ministry of Power and Renewable Energy. He also said that the Government was likely to go for another spot tender for coal until a final decision was made over the controversial longer-term contract.
The Lakvijaya plant needs at least 2.25 million tons of coal per year. The shipments can only be unloaded at Norochcholai during those months of the year that are not affected by the monsoon. The LCC first called tenders in April 2015 to procure 6,750,000 tons of coal for Lakvijaya on a three-year contract.
The deal was worth around Rs. 50 billion. Seven bidders were shortlisted by a Technical Evaluation Committee (TEC) that had been appointed by the Standing Cabinet Appointed Procurement Committee (SCAPC). One was disqualified. The TEC made its choice after examining the tenders but a dispute broke out over its choice of supplier—Swiss Singapore. Four of the shortlisted bidders then went to the Procurement Appeal Board (PAB) against the selection.
Now, the Ministry of Power and Renewable Energy has presented a Cabinet memorandum recommending that Swiss Singapore be given the contract as it was the “lowest evaluated substantially responsive bid”. But interested parties are once again protesting against this choice on the basis that the Cabinet was misled.
Ministers were informed that the TEC and SCAPC found Swiss Singapore to be the lowest bidder after an evaluation of all the proposals. However, they were not told that two evaluations were done and that the first found Noble Resources International (Pte) Ltd—the company which has supplied coal to Norochcholai since it started functioning—to be the most suitable bidder.
Cabinet was also not informed that Swiss Singapore became the lowest bidder only after certain standards in the bid document were dropped after the company (in violation of due process) wrote directly to the SCAPC and requested that those parameters be removed.
This hotly-contested coal tender has been cancelled four times during the last five years, with fresh tenders being called each time. “There is a pattern,” said Dr. Batagoda. “Every time the Tender Board makes a decision, the bidders appeal it and the Procurement Appeal Board rejects it. Then Cabinet says cancel the tender and give Nobel Resources the contract. It keeps happening.”
“This time, we felt the Government must make a decision,” he said, revealing also that the Government could go for spot tenders for part of Lakivijaya’s requirements, and a one-year contract for others.
Cabinet was notified that a failure to take timely decisions regarding the procurement of coal has led to a “considerable decline in the generation of electricity due to unavailability of required coal”. The Government has been forced to use expensive oil-fired power plants to compensate for the loss of energy.
“It is also to be noted that during the past year, the coal supplier has not been able to supply 300,000 (three hundred thousand) metric tons of coal resulting a huge loss [sic] to the Ceylon Electricity Board (CEB),” the Cabinet paper, seen by the Sunday Times, states.
Signed by Ranjith Siyambalapitiya, the new Minister of Power and Renewable Energy, the memorandum says that the procurement of coal from a single supplier on a long-term contract has created many problems. It, therefore, recommends that 4.5 million metric tons be bought through a long-term contract and the remaining 2.25 million metric tons through spot tenders.
The paper has not yet been approved.