Cabinet okays Govt-to-Govt coal deals and unsolicited proposalsView(s):
The Cabinet has given approval for Lanka Coal Company (Pvt) Ltd (LCC) to buy coal on Government-to-Government contracts and unsolicited proposals after bids for both recent term and spot tenders were deemed unresponsive, authoritative sources said.
The approval was granted this week and no offers are on the table yet. Both methods will place coal procurement outside the competitive bidding process.
Last month, LCC opened international competitive tenders to buy coal on both spot and term basis after a bid awarded in August was cancelled by the Cabinet over questions regarding the procurement process.
It is now urgent to buy coal for the Lakvijaya plant as supplies are assured–that is, paid for–only until mid-January, the sources said.
Four companies placed bids for the spot tender but were deemed “non-responsive” for various reasons such as failure to offer bid bond, lack of experience and incomplete documentation. They were all new suppliers.
Two companies bid for the term tender–Coral Energy DMCC and a joint venture between China Machinery Engineering Corporation (CMEC) and Brown Investments PLC, a subsidiary of Brown & Company PLC. They, too, were found to be non-responsive as they did not offer the mandatory 180-day credit.
“Finding money for coal ships is a longstanding issue, with the People’s Bank also stating that it cannot issue letters of credit,” the sources said. “None of the parties offered the required credit.” One supplier is owed US$ 9.8mn and another US$ 8.7mn since early this year.
The last shipment of 60,000 tons arrived in Sri Lanka on Thursday from Swiss Singapore Overseas (Pte) Ltd. There are 14 shipments more. Four have been paid for and a fifth will be settled once it arrives. Money needs to be found for shipments beyond that.
SUEK AG also has two shipments out of eight awarded last year pending. Adding to the uncertainty is a liquidity crisis at the Ceylon Electricity Board (CEB) which has left it short of money to pay for coal.
“We need to procure coal within a short timeframe for next year,” the sources said.
The last tender, awarded to the UAE-based Black Sand Commodities FZ-LLC, was cancelled by the Cabinet after it was challenged in the Supreme Court by former Jathika Hela Urumaya MP Ven. Omalpe Sobitha Thera. The company said it did not wish to be embroiled in legal proceedings. Ven. Sobitha Thera withdrew his fundamental rights application after the tender was annulled.
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