ECONOMYNEXT – Sri Lanka’s listed Brown Investments Plc, a subsidiary of Brown & Company PLC and the investment arm of LOLC Group, is expecting to start negotiation with relevant authorities on a 4.5 million tonne coal deal partnered with a Chinese firm through an unsolicited proposal, the company said.
However, industry experts say the move was lacking transparency as Brown Investments Plc submitted a second unsolicited proposal after the tender was awarded to a United Arab Emirates’ firm and the bid is yet to be canceled.
Power & Energy Minister Kanchana Wijesekera in the parliament last week said the UAE-based Black Sands Commodities FZ LLC which was awarded a contract to supply coal on credit has refused go ahead until legal clearance is given with some activists went to court.
Brown Investment in a disclosure to the Colombo Stock Exchange said it together with China Machinery & Engineering Cooperation (CMEC), a company registered in China as its consortium partner, submitted an unsolicited proposal on August 12.
In the unsolicited proposal the consortium offered terms to the Lanka Coal Company such as willingness to accept 50% of the contractual price in Rupees coupled with the option of paying that 50% within a period of 5 years, in addition to being low in price of coal per Metric Ton, compared to failed selected awardee, the company said.
The proposal was submitted after the Cabinet of Ministers decided to call for solicited, unsolicited and Government to Government proposals for the procurement of 4.5 million MT of coal for Norochcholai Lakvijaya Coal Power Plant (LVPP) and award the same for the most favourable proposal, it said.
The company said in a letter to the Minister of Power and Energy on September 8, it has reiterated that its consortium is able to ensure uninterrupted supply of coal in order to ensure the continuous supply of coal to the country.
The letter was sent after having formally learnt the failure to submit the performance bond on the part of the selected bidder, and consequential annulment of award made and forfeiture of bid Bond submitted, the Brown Investments said in the disclosure.
“In the above circumstances, considering the terms offered in its proposal, the Company reasonably expects to enter into negotiations with the relevant authorities in order to secure the supply of the required volume of coal,” the company said.
However, Minister Wijesekera told the parliament last week that the supplier who won the bid “had decided to suspend performing the contract awarded to them until legal clearances were given”.
Wijesekera said the ministry called for the tenders on July 21 and they closed tenders on August 10 with two companies responded to the tender.
“One company said they will give one ton for 328 US dollars,” Wijesekera told the parliament.
He also said CMEC-Browns had offered coal at 554 dollars per tonne and the consortium had asked payment 50 percent in US dollars and 50 percent in rupees or yuan. There was another proposal for 526 dollar a tonne.
“After the tender closed, two days later CMEC sending another proposal says they can give us coal for 285-290 US dollars,” Wijesekera told the parliament.
“After looking at the tenders they have reduced the amount and then they say to pay 50 pct in US dollars and 50 percent in rupees, that is also after 5 years,” he claimed.
“After closing a tender, we can’t go and give the order to another person.”
Public Utilities Commission Chairman Janaka Ratnayake has said current coal supplies were enough to generate power till October 2022. If there is no adequate coal, the country is likely to face extended blackouts, officials have said.
Black Sand FZE won the bid at $328.22 per metric tonne of coal for next three years with a six-month interest free credit was expected to supply coal through Suek AG which is one of the world’s largest coal trading companies, industry sources said.
The company also has proposed an option to decide the price through a formula, which could reduce the price in the event of the price decline in the global coal market during the three-year deal, industry sources told Economy Next.
“The UAE company has not made the performance bond payment because of possible legal battle on the contract,” one source said asking not to be named.
“What happened was one Sri Lankan company presented a second unsolicited proposal after the bid was opened and awarded to the UAE company and this raise serious concern about the transparency.”
The Brown Investments-CMEC consortium in its original unsolicited proposal submitted August 12 quoted two price options: $554.27 and $526.18 per metric tonne, much higher than UAE-based company’s price, another source who is aware of the the prices told Economy Next.
Later, the consortium through a second unsolicited proposal submitted, quoting $295 per metric tonne of coal, a government source and an industry source said. (Colombo/Sept14/2022)