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Raijin Energy claims Rs2.8b in compensation from NEA

Raijin Energy claims Rs2.8b in compensation from NEA

KATHMANDU: Raijin Energy Co has claimed Rs2.8 billion in compensation from the Nepal Electricity Authority (NEA) after it scrapped a contract to install solar plants at Devighat and Trishuli in Nuwakot district on orders from the parliamentary Public Accounts Committee. The Chinese company has threatened to take the state-owned power utility to court if it does not pay the money. Raijin Energy has written to the NEA, the project implementing agency, that it has already initiated the process of installing the solar plant and even imported some of the equipment. “They have written that the abrupt cancellation of the agreement has put their investment at risk and have demanded compensation,” said an NEA official. The contractor’s demand has not only put the $37-million World Bank-funded project in limbo but also put the NEA in a difficult situation. The cancellation has prompted the multilateral lender to mull abandoning the 25 MW solar plant project. The House panel’s orders to the NEA to scrap the contract and begin a fresh process will further delay implementation of the project which is already one and a half years behind schedule, it said. Last August, the parliamentary committee had directed the NEA to scrap the deal with the Chinese company as its appointment violated the Public Procurement Act and start a new procurement process to appoint another contractor.

The World Bank has defended the NEA’s decision to appoint the Chinese company saying the contract was awarded following an extensive review under the procurement policies and practices adopted by 189 member governments of the World Bank Group. The World Bank in February 2015 agreed to provide $130 million to build solar stations to supply electricity in the Kathmandu Valley and reduce electricity leakage. Of that amount, $37 million was earmarked for installation of solar plants at Devighat and Trishuli in Nuwakot district. Although work to erect the solar plant should have begun within a year of signing the aid agreement, the NEA took around two years to award the contract as the contractor selection process was dragged into controversy.

The controversy began after former NEA managing director Mukesh Raj Kafle unilaterally decided to hire a Chinese company to build the project. The company was later declared ‘technically unqualified’ by a committee comprising international experts. Based on this decision, the new NEA Managing Director Kulman Ghising decided to hand over the project to Raijin Energy. However, Ghising was blocked from hiring Raijin Energy after a complaint was lodged at the parliamentary Public Accounts Committee that its Rs3.7 billion price tag was higher by Rs680 million than the cost proposed by the contractor favoured by Kafle. The World Bank has said that contractors should not be selected only on the basis of the price they quote as they should first meet the project’s criteria. The Public Procurement Act also calls on project developers to first evaluate the technical bid documents before assessing the financial bid documents. This is to ensure that quality is not compromised in the name of saving on costs.