The long-term tender to secure 50% of the coal requirements for Norochcholai – the country’s sole coal power plant – for the terms 2024/’25 and 2025/’26 is likely to be cancelled, reliable sources have informed The Sunday Morning.
This is due to Russia’s Black Sand Commodities Fz Llc (BSC), the current supplier, having proposed to offer coal at a lower rate than the most responsive bidder selected through the tender process.
It is learnt that BSC, which is not a registered supplier with the Lanka Coal Company (LCC), had not participated in the tendering process. However, five companies had submitted bids for the tender, of which four were deemed to have met all the required bidding conditions.
Following the completion of the evaluation process by the Ministry of Finance’s Standing Cabinet-Appointed Procurement Committee (SCAPC), the selected bidder had been sent to the Cabinet for approval.
Although the tender had been submitted several weeks ago to the Cabinet, during this period, the Russian company had submitted a proposal to supply coal at a lower rate.
In response, the Cabinet had advised the SCAPC to renegotiate prices with the selected bidder, but according to a senior official from the Ceylon Electricity Board (CEB) who wished to remain anonymous, these negotiations have not been successful.
Nevertheless, LCC Chairman Shehan Sumanasekara confirmed that the LCC was awaiting the Cabinet’s decision, which he hoped to receive this week.
The tender, covering the periods 2024/’25 and 2025/’26, seeks to secure 2.25 million MT of coal.
The deadline for the long-term tender had been extended several times before it closed on 8 July. Initially scheduled to close on 2 April, the tender was first extended to 2 May and then to 24 June.
As previously clarified by the LCC, the tender had been extended because some suppliers had needed more time for their bids to be ready due to certain holidays in their respective countries, certain banking facilities, and several other reasons.
The LCC was to adopt a different approach for the long-term tender this time by floating a single tender to procure only 50% of the total requirement for two coal unloading seasons. This was to include 50% of the requirement from a long-term contract tender and the rest from spot tendering.
Russia’s BSC won last year’s long-term coal tender to supply coal to the Lakvijaya Power Plant (LVPP). The company was expected to supply a total of 2.25 million MT through 38 shipments of coal at an index-based rate of $ 124 per MT.
BSC is the second lowest bidder, following the controversial Coral Energy Group (CEG), which submitted bids for the long-term contract at a rate of nearly $ 123 per MT. The tender was initially awarded to CEG, but the company had subsequently cancelled its bid. CEG had informed that it could not provide coal at the price it had initially suggested, citing issues related to the region.
Given that BSC had submitted the second lowest bids, it had therefore been selected to be awarded the tender.
Nevertheless, in 2022, Russia’s Suek AG/BSC came under the spotlight following the award of a $ 1.4 billion contract with approval from the Cabinet. The company had offered the lowest bid at $ 328.22 per MT, including freight charges, to supply nearly 4.5 million MT of coal to Lakvijaya for three years on a six-month credit period.
However, the tender was subsequently cancelled by Power and Energy Minister Kanchana Wijesekera as the selected supplier, BSC, had communicated its inability to perform the tender, citing concerns about legal cases filed and payment guarantee risk.
The standard tender requirement is 2.25 MT, with half reserved for the subsequent season. Allocation adjustments will be made based on current market prices, with final decisions guided by rates secured in April while preserving a consistent base price.
The coal for the long-term tender will be procured at a fixed rate for two terms based on index prices, with 19 registered suppliers, including companies from Russia, Indonesia, Australia, and the UAE, expected to submit bids. According to the LCC Chairman, nine cargoes will be available from previous contracts, starting from 15 September.
According to the CEB, the total coal contribution to the country’s national grid has risen to around 40.3% of the total electricity generation requirement. This comes against the backdrop of the CEB expecting an extreme dry season.
LVPP provides nearly 900 MW of energy to the national grid, accounting for about 40% of the country’s total energy requirement.
Source; The morning
