Nepali Times
BPC on the block again


It is one more episode in Nepal's privatisation saga: there is going to be a fourth retender for the handover of Butwal Power Company, a deal seen by donors and foreign investors as a bell-weather for Nepal's seriousness about inviting private business.

The official reason this time is a typographical error. And Round Four of the bidding promises to be different from those before because one of the two rival groups bidding for the hydropower company, Norway's Interkraft, has decided it is fed up with official bungling, ineptitude and delay.

Finance Minister Ram Sharan Mahat and Minister for Water Resources Bijaya Gachchedar suggested that the money offered in the last round was not enough and that Interkraft's bid was faulty. The Privatisation Committee met on 10 September and endorsed the plan, which needs to be officially approved by the cabinet. Mahat told us: "The bid was disqualified technically and on financial grounds. A mistake is a mistake and the committee decided it could not be allowed."

The mistake: in the bond where bidders had to mention the number of shares about a dozen times, Interkraft slipped up. It put down Rs 7,292,932 once and the accurate Rs 6,292,932 in every other instance. Interkraft Nepal had tendered one joint bid, the only one to reach the final financial round ("BPC's privatisation saga," #57). The Norwegians and its Nepali backers say the government has tested its patience enough.

"We discovered the typo in the bid about a week after submitting the tender and duly informed the Privatisation Cell in writing," says Gyanendra Pradhan, Interkraft AS's coordinator in Nepal. "Verbally, officials in the cell and even top finance ministry officials assured us that it was not a major mistake."

The Privatisation Committee met to consider the proposal of Mahat and Gachchedar for re-tendering on 10 September. On the same day Pradhan and his group wrote in offering to review their offer (price) as circumstances had changed since they put in their bid. The same letter says the group hoped it would be given an opportunity to negotiate with government before the final decision was taken-as had been done in the past. That did not happen and by late evening Monday, it was final: there was to be a re-tender.

Interkraft and its Nepali partners suspect there is more to the BPC privatisation process than meets the eye. For instance, they say, why was the "mistake" initially ignored and later used as the reason for disqualification on a technicality?

"We've decided not to re-bid, because now we have begun to think they want something we cannot give," Pradhan told us. One of his partners added: "They may as well set a floor price this time so those who don't want to pay as much will not waste time on it."

Interkraft and its partners had offered Rs730 million for BPC, cash down. The rival Chaudhary Group, which did not make it past the technical evaluation, later made it public that it had offered Rs820 million-70 percent cash, the rest payable within two years, secured by pledging 50 percent of shares acquired in the purchase. The Group was said to have been involved in behind-the-scenes lobbying to prevent Interkraft from getting BPC.

BPC is now back on the privatisation list, but still ahead of about 12 other planned divestments. Background work on the 12 has been completed and the privatisation cell for each can be readied to accept tenders with three months' notice, should the government recommend it. We asked Douglas Clarke, adviser to the Privatisation Cell in the Ministry of Finance, to comment on the BPC developments. "In my opinion a total re-tender is unwise," was all he would say.

The government's privatisation efforts are backed by Norway and Britain's Department for International Development (DfID) which has spent ?2.6 million on it in the past four years. Britain's Independent Power Company which sent in a joint bid with the Chaudhary Group in the previous round was non-committal this time.

Whatever the outcome of the BPC drama the government will have a lot of explaining to do at negotiations for the next phase of privatisation support which began last week.

(11 JAN 2013 - 17 JAN 2013)