LAHORE: In what legal fraternity and experts on contracts describe as a “dubious deal,” the Punjab government, out of total 1,000MW Quaid-i-Azam Solar Park, has issued letter of interest (LOI) for 900MW to a Chinese investment company without any process of transparent selection and competitive bidding.

The signatory -- Managing Director of the Punjab Power Development Board -- insists: “The process is legal, transparent and according to the policy of the Punjab government, and the LOI has been issued on behalf of the Punjab government.”

But critics including noted lawyers on energy issues and former members of the Central Contract Cell of Wapda say the “entire deal is shrouded in mystery and would create legal and contractual problems for everyone.”

The Punjab Power Development Board – a subsidiary of the Punjab Energy Department – had accepted an investment proposal by a Chinese company for the development of 900MW Solar PV Power project. The PPDB, which met on Sept 5, “considered the company eligible” and asked it to provide a bank guarantee.

Know more: PM launches solar power plant in Bahawalpur

On Sept 22, the company furnished the guarantee and the PPBD issued the letter of interest the very next day, setting the timeline of two months for the company to “complete feasibility of the project at internationally accepted standards, including environment impact assessment.”

Parallel to the issuance of the letter of interest, the Punjab Energy Department moved a summary to the chief minister to allow lease of 6,000 acres to the investment company to set up the plant. The summary is still with the CM Secretariat and may be approved within next few days.

The fast track and single source acceptance of “eligibility criteria, bank guarantee, issuance of LOI, setting an impossible deadline for feasibility study and instant initiation of summary to hand over land,” sent jitters among the bureaucratic and legal circles attached with the power wing of the Punjab government. They sounded caution but were overruled quickly.

Interestingly, the parent company of the same investment company, which has now got LOI for setting up 900MW plant, had been rejected in bidding for the first 100MW plant which the Punjab government wanted to install with its own money. It was rejected for being a telecom company but its subsidiary has won LOI for 900MW assignment.

“The process certainly creates issue of transparency,” claims noted lawyer Anwar Kamal, who deals with cases of energy sector and contractual matters. By issuing LOI and accepting a bank guarantee (of $900,000) through non-transparent manner, the Punjab government has already created rights for the investor. They would soon come back to haunt it and it would be situation of damned if you do, damned if you don’t. How would the regulator respond?

If the matter goes to court, how would the Punjab government justify such a unilateral acceptance of credentials of a company it had rejected only a few months ago. All these issues would be raised in due course of time, he said.

“Apparently, the Punjab government has taken a cue from its own power policy in dealing with the investor, whereas if the energy has to go to the national grid, it should either be federal Private Power Infrastructure Board (PPIB) or Alternative Energy Development Board (AEDB),” says a former head of Pakistan Electric Power Company.

“Skipping federal bodies in matters of national grid is beyond comprehension. Two-month deadline cannot create a bankable feasibility study. There were far more transparent selection criteria in the process of rental power, which courts did not accept. How would this one go, one needs to wait and see,” he wondered.

Ms Sania Awais, the MD PPDB, thinks: “The entire process is transparent and falls within the parameters of the Punjab Power Policy 2006 which was revised in 2009. It allows investment in alternate energy sector.

“We had given umbrella advertisement, inviting investment in the park and got response and issued LOI consequently.”

As for awarding 900MW out of 1,000MW, she said the park capacity would subsequently be increased to 1,500MW. Thus the company would be competing with others for investment.

Published in Dawn, September 27th , 2014