After the deal sparked controversy and activists went to court. The Power and Energy Minister stated that a company awarded a contract to supply coal on credit has refused to proceed. They said until legal clearance is obtained.
According to the energy ministry, the supplier “decided to suspend performing the contract awarded to them until legal clearances were given.”
“I met with officials from the Lanka Coal Company and contract awarded suppliers yesterday.” I discussed issues related to the Coal Procurement for the Lakwijaya Power Station,” said Power Minister Kanchana Wijesekera.
“Contingency plans were also discussed. This is in order to procure the coal requirements. For the following season, the awarded suppliers are unable to supply the requirements.”
According to publicly available information, a company called Black Sands Commodities FZ LLC based in the UAE was awarded the contract. They were to supply 4.5 million tonnes of coal from Vanino Port in Russia.
It was supposed to supply coal at a base rate of 295.22 US dollars and freight at 33 dollars per tonne.
The agreement was intended to cover the seasons 2022-2023, 2023-2024, and 2024-2025. The price, according to critics, was too high.
However, the company had agreed to extend credit for six months. When the central bank prints money to create forex shortages, Sri Lankans have a tendency to buy fuel on credit.
In parliament, Minister Wijesekera defended the deal. He claimed that the supplier was the lowest responsive tender.
“We called for tenders on July 21,” he told parliament on August 8. “And we closed it on August 10th.” The tender received two responses. One company stated that they will sell one tonne for 328 USD.”
There were also unsolicited bids. He said one was from a company called CMEC-Browns, which had offered coal for $554 per tonne.
The company requested payment in 50 percent US dollars and 50 percent rupees or yuan. Another proposal was made for $526 per tonne.
“After the tender closed, CMEC sent us another proposal saying they can give us coal for 285-290 US dollars,” he explained.
“After reviewing the tenders, they reduced the amount and then said to pay 50% in US dollars and 50% in rupees, and that is also after 5 years,” he claimed.
“We can’t go and give the order to someone else after we close a tender.”
Meanwhile, Public Utilities Commission Chairman Janaka Ratnayake stated that current coal supplies are sufficient to generate electricity until October 2022.
Ratnayake stated that he would not comment on the tender process, but that coal was required to avoid power cuts because without it, 900MW would leave the system, forcing the Ceylon Electricity Board to cut power.
“We only have enough coal until October 25,” Ratnayake said. “The tender has been awarded, but some complications have arisen as a result of a court case.” If we cannot secure a supply by October 25, we will be forced to shut down all three coal power plants.”
Two more shipments from an earlier tender are on their way. Officials will require $50 million USD to clear the two shipments.
