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Gas turbines tender: Chinese company aggrieved by ministry decision
Yet another Ceylon Electricity Board (CEB) tender–this time for the design, manufacture and supply of three 35 megawatt gas turbines–is in limbo, with the Power and Energy Ministry wanting the award cancelled even after the process was completed and a Chinese company selected.
The decision has led China National Technical Imports and Exports Corporation (CNTIC) to complain that it was “seriously aggrieved” as it had spent “a considerable amount of valuable resources in processing the tender.”
The purchase of the three 35mw gas turbines had been in the CEB’s approved long-term generation expansion plan since 2007. Separately, the existing 115mw open cycle gas turbine (also called Fiat Avio or GT7) is due to be retired in 2023.
There are now competing proposals on the table, CEB official sources said. One faction wants to buy new gas turbines for US$ 113mn (Rs 21.8bn) while another proposes to repair the old GT7 which was commissioned in 1997 for Rs 1.4bn.
There are arguments for and against each option, energy experts said.
Much time and public resources have been wasted on the procurement process which started in February 2016 with regard to the three gas turbines. A Project Management Unit (PMU) was set up, complete with allowances and other benefits for members. But the CEB did not complete the request for proposals (RFP) document till 2019 when it was finally submitted to a Standing Cabinet Appointed Procurement Committee (SCAPC).
The SCAPC approved the RFP and instructed the CEB to advertise it, thereby inviting bids. This was also not done. Instead, in July 2019, a board paper was submitted requesting a higher allocation for the project and also to extend the period of the PMU, with all its emoluments.
By then, the country was in a severe power crisis. And the CEB board decided the utility cannot wait any longer for the team to produce another tender. It instructed the General Manager (GM) to submit a proposal to fast-track the process.
The board also directed the GM to explore alternatives that can come into operation within a shorter time frame as the CEB could wait another three years. It was agreed to adopt modern aero-derivative gas turbines that are operational in six months.
The PMU was re-formulated and placed under the CEB’s Transmission Division. The tender was advertised in October 2019 and five bids were received in December 2019. Two bidders–CNTIC and a company named TSK–were notified that they were shortlisted after technical bids were opened.
However, the CEB GM then maintained that the utility did not have money for the project as the allocation was used to settle urgent dues to the Ceylon Petroleum Corporation. He additionally claimed that the chosen financial institution, the People’s Bank, had said it needed a Treasury guarantee for it to lend the funds.
In October 2020, a full year after the tender was published, the Ministry sought approval from the Cabinet to either direct the Treasury to issue a guarantee to the People’s Bank for a loan of US$ 113mn for the procurement; or to cancel the initial tender and direct the CEB to issue a fresh request on supplier’s credit financing basis. The second option was approved.
But even years after it was initiated, the project is still pending. In the meantime, the People’s Bank informed the Ministry that it did not refuse credit and that the matter had not even been negotiated. The Secretary has now written to the CEB asking it to provide documents to substantiate the claim that the bank had refused to finance the project.
It is not clear at what stage it was confirmed CNTIC was the bid winner. CEB sources said it was selected in February this year after financial bids were opened they were cheaper than TSK. An award letter was not granted because the utility had claimed it had no funds. But CNTIC has been flexing its muscles with the authorities, even hinting at legal action, the officials reported.
Parallel to this, another proposal was submitted to the Ministry to repair GT7. The initial price quoted for this was Rs 3.5bn (including to replace the rotor) but it has been brought down to Rs 1.4bn with scope reduction. The faction that supports outright purchase of new turbines argues that it is more feasible.
“It is still all in suspense,” a senior official said, requesting anonymity.