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Tuesday September 28th, 2021

Concerns raised over US deal subverting Sri Lanka competitive LNG terminal procurement

ECONOMYNEXT – Engineers of Sri Lanka’s state-run Ceylon Electricity Board have raised concerns over how competitive procurement for a floating LNG terminal and pipeline was undermined by an unsolicited deal with a US company.

The CEB floated tenders for a floating storage degasification unit on a 10-year build operate own basis and a separate pipeline was also tendered on a build operate transfer basis.

An announcement was then made that a ‘framework agreement’ had been signed to sell state shares in an existing combined cycle power plant to a US based company called New Fortress Energy who will set up an FSRU.

The CEB Engineers Union says over 20 parties had taken bid documents prior to the tender and it would be as great shock to prospective bidders who are spending money to put up a serious proposal to find that a non-transparent deals are being made without competitive bidding.

“I think to sign a agreement in the middle of a tender process is extremely saddening,” CEBEU President Saumya Kumarawadu told reporters.

“This like an interloper being pushed in between an engaged couple who are making arrangement to get married. And the sad thing is the parents are also approving it.”

Only one week was granted to a request to extend the tender deadline beyond June in an attempt to get more responses as bidders were constrained by a lockdown.

“This was in contrast to the case where extensions of up to 5 to 6 weeks were given for much smaller tenders,” Kumarawadu said.

The Union says there is obviously no requirement for two FRSUs at this time.

The details of the deal are not widely known, but the Union says the FSRU and LNG fuel purchases must be kept separate.

The Union successfully fought off an attempt by the last administration to foist take-or-pay LNG deals on the CEB on the guise of a ‘free’ a terminal. A take-or-pay deal commits the CEB to buy LNG whether it wants or not at whatever price the terminal owner is giving.

LNG prices have also started to soar in recent months as US Fed printed money and slashed interest rates given on excess reserves triggering a so-called ‘Powell Bubble’ in energy commodities, metals and food.

“Some responses have come for the tender and is being evaluated now,” Kumarawadu said. “We are also watching to see that the the tender goes according to process.”

The CEB and the Engineers have battled attempts to foist expensive plants on the utility with varying degrees of success.

It went to court to stop so-called feed in tariffs for renewable energy mandated by regulation which were up to 80 percent higher than what was came through competitive bidding.

Industry officials say the CEB itself has little control over tenders which are evaluated outside the agency by a Cabinet Appointed Tender Board or Negotiation Committee.

The CEB’s involvement is to prepare the tender documents and it is represented in a technical evaluation committee which will decide whether bids are substantially or otherwise responsive to the tender.

Sri Lanka’s power minister Dulles Alahapperuma questioned in parliament how a power sector deals are being made without his ministry said that the deal apparently related to shares of a company held by the Treasury. (Colombo/July29/2021)

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