COMPAGNIE THERMIQUE DU SUD - ELECTRICITY GENERATION - CONTRACT
The Leader of the Opposition (Dr. N. Ramgoolam) (By Private Notice) asked the Minister of Public Utilities whether, in regard to the contract awarded to the Compagnie Thermique du Sud (CTDS) for electricity generation, he will state -
(a) why a coal-fired power plant has been preferred;
(b) the projected cost of 1 kWh of electricity from -
(i) Fort George
in 2005 and 2008;
(c) the additional cost incurred by the CEB for the above purchase of electricity compared to its own generation, and
(d) the impact on prices to consumers.
Mr Ganoo: Sir, in view of sustained demand in electricity, adequate supply has to be provided for. In fact, in 2002, the CEB carried out an in-depth forecast exercise with a view to assessing demand in the immediate, short and medium term.
As a consequence thereof, possibilities of additional generation capacities had to be looked into. For this purpose, Government appointed a Steering Committee in August 2002. The terms of reference of the Committee were as follows -
(i) to examine the following three power projects –
(a) a Consortium comprising Union Fenosa of Spain and Wartsila of Finland as well as the promoter SBEC Systems AB of Sweden and Ireland Blyth Ltd;
(b) the Medine Steam and Power Generation Co. Ltd, and
(c) the Union St. Aubin Sugar Estate,
in the light of CEB's needs for additional capacity in the short-to-medium term and anticipated major developments in the Industrial, ICT and tourism sectors, and
(ii) to make recommendations, as a matter of urgency, for the timely commissioning of a new power plant taking into consideration all relevant factors.
The Committee started its work by the examination of three expressions of interest from local promoters namely, Medine, Consortium SWE and CTDS.
During the workings of the Committee, the PB Report, which was commissioned by my Ministry in April 2002 was received and it was passed on to the Committee to assist it in its deliberations. It is to be noted that the PB report included an audit of generation capacities in Mauritius, a load demand forecast as well as a generation expansion plan.
The Steering Committee, Sir, advised Government that a competitive process be put in place to Request for Proposal' from the three local promoters who had expressed interest and Government relayed this advice to the Board of the CEB. The latter issued RFP documents to the three promoters on 31 December 2002. By the closing date, on 26 February 2003, bids were received only from CTDS and the Consortium SWE. The former proposed a coal fired plant while the latter an oil plant. No bid was received for a coal bagasse plant. It is worth pointing out that the RFP was opened to different generating technology alternatives.
Sir, an evaluation panel under the chairmanship of Professor P. K. Baguant and comprising members from the Management Audit Bureau and the CEB evaluated the two bids.
On 10 April 2003, the Board of the CEB approved the recommendations of the Evaluation Committee and also decided that negotiations be held with CTDS, the preferred bidder. The bid of CTDS was for a coal-fired plant.
In line with the Board's decision, negotiations were held with CTDS until an agreement was reached, on the basis of which a Power Purchase Agreement was proposed to the Board. The Board approved the Power Purchase Agreement on 03 July 2003.
Sir, from what I have explained, the CTDS offer was the most competitive one following the RFP exercise. The bidder proposed a coal-fired plant, which was in compliance with the tender requirements.
As for part (b) of the question, Sir, I am informed by the CEB that at 85% load factor, the prices are as follows -
Fort George projected cost in 2005 : Rs1.94/kwh
and in 2008 : Rs2.06/kwh
CTDS projected cost in 2005 : Rs2.16/kwh
and in 2008 : Rs2.51/kwh
The project cost is based on a set of assumptions for local and foreign inflation rates, foreign exchange rates, interest rate on borrowings, fuel prices, plant utilisation factor, etc. and the projected cost of 1 Kwh. This comparison must take into consideration the time in which the capital investment was made; i.e., Fort George costs reflect decreasing financial costs as the asset has depreciated since starting more than a decade ago.
Sir, as regards part (c) of the question, CEB does not have sufficient generating capacity in its own plants to meet electricity demand in Mauritius and, in keeping with Government policy to encourage local and foreign investment in the development of electricity infrastructure facilities, purchases electricity from IPPs to meet customers demand. The costs incurred for these electricity purchases vary with each IPP and generally fall between the range of costs of CEB's own generating stations. Purchases from IPPs and the projected purchase prices from CTDS, are generally higher than the unit energy cost at Fort George, but less than the unit energy costs at other CEB power stations.
As regards part (d) of the question, Sir, the CTDS project will contribute to a lower overall cost of electricity in Mauritius in that it will displace higher cost generation, such as at St. Louis and Fort Victoria, and will have a beneficial impact in reducing technical losses in the transmission and distribution network.
However, irrespective of whether the investment comes from the CEB or from IPPs, it is undeniable that additional capacity generation would have an impact on the prices to consumers, as is the case with any commodity.
However, my Ministry and Government will ensure that in the process, inevitable increase in cost is minimal and reasonable.
In the same context, Sir, Government will set up a Utility Regulatory Authority very soon to further strengthen the safeguard of the interest of consumers.
Dr. Ramgoolam: Mr Speaker, Sir, the strategy of Government has always been to encourage the utilisation of bagasse to generate power. May I ask the hon. Minister why is it then that the Government has departed from this strategy for electricity generation by coal only in that case?
Mr Ganoo: Sir, the Leader of the Opposition is right. In line with our Sugar Sector Strategy Plan, Government has encouraged, and will encourage the setting up of bagasse coal plant. In this case, as I have said, Mr Speaker, Sir, the bid was opened to (different generating) technology alternatives. In fact, Medine was initially one of the prospective bidders. We had thought that Medine Sugar Estates would participate in the bid. But, unfortunately, as I said in my answer, at the closing date, Medine Sugar Estate did not submit any bid. We were left only with the two bidders as I have just mentioned, the Consortium SWE and Union St. Aubin Sugar Estate.
Dr. Ramgoolam: Can the Minister explain how can the Government support a coal powered generation project by sugar sector? These people are concerned with sugar, where there is absolutely no bagasse involved here. How could the Minister have accepted this?
Mr Ganoo: The hon. Leader of the Opposition must know also that right now, Sir, there is an ongoing tendering exercise for bagasse complementary fuel, the RFP has been issued by the CEB. In fact two proposals have been received for a coal bagasse plant, one coming from FUEL and the other one from SUDS. At the moment, there is an evaluation exercise going on for a future coal bagasse plant.
Dr. Ramgoolam: Precisely, we know there are other projects. Why did the Minister in that case make an about-turn policy and go for coal? In fact, we should never have accepted coal. That is why I am asking the question.
Mr Ganoo: The hon. Leader of the Opposition is underestimating one very important point, Sir, i.e. that there was at that time, and there is still, an urgency. According to CEB requirement, we will need, by next year, another additional 35 megawatts. In 2006, we will need two additional units of 35 megawatts each. There was therefore a question of urgency and to avoid any load shedding, Mr Speaker, Sir, we had to start the process of awarding a contract for new capacities. Unfortunately, no bid for coal bagasse plant was received.
Dr. Ramgoolam: The Minister is hiding behind the bid! I think the policy of the Government should have been clear. First of all, it shows bad planning on the part of the Minister. Furthermore, if I may quote from the appointed auditor for optimal electricity generation PB power which concluded emphatically in its report that "the new generating capacity should be a dual fired-coal bagasse plant. That is the preferred choice based on economic grounds". Why did the CEB go for coal? First of all, the bid should have said that it has to be coal and bagasse because we are concerned with the sugar sector.
Mr Ganoo: Mr Speaker, Sir, unfortunately, I will have to repeat what I said. The request for proposal did not exclude coal bagasse and did not exclude any technology. It invited all alternative technologies. At one point, Medine S.E. was a prospective bidder, but, at the closing date, Medine S.E. backed out. It is not our fault, Mr Speaker, Sir. I repeat, there was an urgency in the situation. By next year, we will need additional capacity of 35 megawatts. I think my reply is clear.
Dr. Ramgoolam: We are saying that it is the major flaw. It should not have been open for the request of proposal. It should have been specifically for coal and bagasse and not for coal. When the hon. Minister is tallking of Medine, we know that this is a cartel. One has scratched the back of the other. Does the Minister think we do not know this?
Mr Ganoo: Mr Speaker, Sir, I have already answered.
Dr. Ramgoolam: Can the Minister confirm that the CTDS is going to use second-hand equipment?
Mr Ganoo: As far as I know, the boiler is a second-hand one, Mr Speaker, Sir. As I said, this exercise has undergone different stages. As I said an Evaluation Committee presided by Professor Baguant was set up. The MAB formed part of the Evaluation Committee. I am sure the Evaluation Committee must have seen to it that all the requirements in the RFP were scrupulously adhered to. They finally give the green light, Mr Speaker, Sir, to invite CTDS for negotiation.
Dr. Ramgoolam: Mr Speaker, when the original unsolicited bid was made from CTDS, they did not mention that they were going to use second-hand equipment. In fact, I would go further to say that, when the EIA was submitted by CTDS, it was not mentioned that it was going to be second-hand equipment. It is only later that this was changed to allow second-hand equipment. Can he confirm this?
Mr Ganoo: Mr Speaker, as far as I know, right from day one, it was known that the company would be proposing a second-hand boiler. In fact, I have to inform the House also that all the tender specifications had to be scrupulously adhered to. The CEB required an 'attestation' from the firm VERITAS which confirmed that the boiler was in good condition. This confirms what I have said that all the precautions were taken by the CEB and the Evaluation Committee to see to it that, in spite of the fact that it was a second-hand boiler, it was in good condition.
Dr. Ramgoolam: Can the Minister tell us when was it known that there was going to be a second-hand boiler? My information is that, at the beginning, this was not known. It is only much later that this was made clear.
Mr Ganoo: I beg to differ with the hon. Leader of the Opposition, because from day one - in fact, before the RFP was issued - it was known that the CTDS, or SUD, as it was known then, would propose a second-hand boiler.
Dr. Ramgoolam: Does he agree, therefore, that this is being a pure coal project? First of all, it is detrimental to the environment. Secondly, we are going to use second-hand equipment. Thirdly, does the Minister realise that this is going to cause a big foreign exchange outflow problem?
Mr Ganoo: Mr Speaker, Sir, to come back as to whether we had a choice of rejecting that proposal, I have explained as to the urgency of the situation. But as for the question of environment, all issues have been looked into. An EIA licence was granted to CTDS.
Dr. Ramgoolam: The Minister mentioned at one point the cost of one kilowatt of electricity from Fort George and CTDS. In his reply he has stated that in 2008 the cost for Fort George will be Rs2.06 and CTDS will be Rs2.51. My information - and this is a public document - says that it will be Rs2.51 for CTBV. But for CTDS it will be Rs2.86. Will he confirm that?
Mr Ganoo: I will not lie to the House, Mr Speaker, Sir. This is a document that I have got from the CEB and I can table it. The information that I have from the CEB is that for CTDS the price will be as follows - Rs2.16 in 2005, For year 2006: Rs2.27. For year 2007: Rs2.39. I did not give that information because the Leader of Opposition asked only for 2008 in his question. In year 2008, the price will be Rs2.51, as I have just informed the House. But I would like also to repeat what I said in my answer which perhaps the Leader of the Opposition did not grasp. I am informed by the CEB that these prices are at 85% load factor.
Dr. Ramgoolam: In fact, Mr Speaker, Sir, I have a public document with me which says exactly what I have said, that is, it will be Rs2.86. I do not know which document is speaking the truth. But what I have with me is also a public document from the CEB which says that the projection for CTDS in 2008 will be Rs2.86 as compared to Fort George which will be, as the Minister has mentioned, Rs2.06. Can I ask the Minister whether he will be able to tell us that, on the Board meeting of the CEB in July 2003, the project leader informed the Board that the purchase cost of one unit of electricity, that is, one kilowatt from CTDS in 2005, would be in the range of Rs2.17 to Rs2.45?
Mr Ganoo: I cannot confirm what the hon. Leader of the Opposition is saying. But I can confirm what the CEB has told me that in 2005 at 85% of the load factor, the price will be Rs2.16/kwh.
Dr. Ramgoolam: Is the Minister aware that some Board members believe that this was done deliberately so that they approved the CTDS project?
Mr Ganoo: I cannot answer that, Mr Speaker. The hon. Leader of the Opposition has got second-hand information about what some of the Board members thought at that time. I cannot answer for what some of the Board members had thought at that time. I cannot confirm this type of information.
Dr. Ramgoolam: The Minister should have known what the Board members were thinking. I am sure my information is correct and that of the Minister is wrong. I maintain that it is Rs2.86 and the Minister will see later on that I am right and he is wrong.
Mr Duval: Mr Speaker, last week the Cargo Handling Corporation attempted to rush to buy some portiques because of a sudden upsurge in port
traffic. This time the CEB is ordering a new power plant because, apparently, again, there is going …
Mr Speaker: Hon. Duval, your question, please.
Mr Duval: I need to explain, Mr Speaker.
… because there is to be a sudden - unexpected obviously - increase in electricity. Why is the planning so bad at the CEB that the public will have to pay much more expensive price per unit, because of the bad planning from Government and from the CEB not to have foreseen what everybody else has foreseen, that is, electricity consumption in Mauritius will continue going up?
Mr Ganoo: It is not unforeseen…
Mr Speaker: Order, please! Hon. Bhagwan, please!
Mr Ganoo: It is not unforeseen, it is not sudden. As I said, Mr Speaker, Sir, at the CEB, there is an ongoing exercise about the requirements and demand of the CEB. In 2002, this exercise was done, and the whole process started this year. It is not at the late hour that we issued the RFP. As I said, the RFP was issued in December 2002.
Dr. Boolell: Mr Speaker, Sir, the hon. Minister has stated very clearly that an indepth forecast exercise had been carried out. Yet, all along, he knew that a generation planning paper was circulated, stating very clearly what CEB engineers had been stating along - and had informed the Board accordingly - that, by year 2004, new base load capacity would be required. For the sake of information, I am referring to a Board paper dated October 200. Over and above that, Mr Speaker, Sir, it is crystal clear that everything has been tailor-made to suit the needs of…
Mr Speaker: Can you take your seat, hon. Dr. Boolell?
Dr. Boolell: Mr Speaker, Sir, let me refer to what Jacques Forget, administrateur of Médine S.E. stated.
Mr Speaker: I am sorry, hon. Dr. Boolell. I want you to put questions, not to cite from documents. You should put your questions and ask the Minister for information you want to have.
Mr Ganoo: On a point of order, Mr Speaker, Sir. I can pretend that I know a little about point of orders. The hon. Member cannot quote what Mr Forget of Médine S.E, who was a bidder, said in the press. A Member cannot quote statements made in the press by individuals.
Mr Speaker: This is why I am asking the hon. Member to put questions.
Dr. Beebeejaun: The Minister said that the PB power study was the starting point in 2002. But before 2002, all along, in 1996, 1997, 2001, you have had reports from Kennedy Donkin, Jica, Tractabel, and the CEB, giving you power forecast. My colleague has just mentioned a paper from
the CEB Board in 2001, saying that there is urgency. Can the Minister confirm that?
Mr Speaker: Hon. Dr. Beebeejaun, can you take your seat? I am again reminding Members that this is question time. What I am asking you to do is to put questions if you have any.
What I am saying is that you have to put questions. You are referring to documents which are not before the House. How do we know?
I am again asking…
Dr. Ramgoolam: Why are you shielding the Minister?
Mr Speaker: I am not taking any direction from the hon. Leader of the Opposition.
Dr. Ramgoolam: Why are you shielding the Minister?
Mr Speaker: I am not shielding anybody!
I warn you again hon. Leader of the Opposition.
Dr. Ramgoolam: I don't care!
Mr Speaker: You don't care?
I have told you what you can do if you are not satisfied! I have told you this morning what you can do! You understand English! You can bring a motion if you feel I am not being fair and that I am shielding the Minister. You can bring a motion and have it debated in the House! You are not going to direct me! I am giving the ruling!
It is for you to see! I am reminding you again: don't interrupt when I am on my feet.
Dr. Beebeejaun: The question is…
Mr Speaker: Do you think I am scared of you?
Dr. Ramgoolam: And do you think I am scared of you?
Mr Speaker: I presume you think I am scared of you!
I know my background! I know where I come from! I am not scared of anybody as long as I am doing my duty properly.
Dr. Ramgoolam: I have the right to ask questions! I am not going to be gagged by you.
Mr Speaker: Yes, you have the right! You have to go by the Standing Orders, the rules!
Dr. Ramgoolam: You too have to go by the Standing Orders.
Mr Speaker: Do you think you are going to intimidate me? Never!
Dr. Ramgoolam: Neither will you prevent me from exercising my constitutional right.
Dr. Beebeejaun: So, there was a plea for urgency as from 2002. But, what the Ministry doing between September 2001 and early 2002 in the light of various reports, saying that there is a need for electricity generation in 2004?
Mr Ganoo: Mr Speaker, Sir, the hon. Member, who was previously responsible for that Ministry, knows what he is talking about. I agree that there have been several reports on load demand forecast; that is true, Sir. But then, the hon. Member also knows that the CTBV was the last power plant that was set up in 2000. A plant has to be set up when the need for additional capacity is felt. Mr Speaker, Sir, a forecast has also to be updated. This is why I said that the CEB regularly carries out an ongoing exercise about demands and projections. So, the forecast had to be updated, and in 2002 we decided that we had to cater for additional requirements of the country. In 2005, as I just said, it was clear that 35 additional megawatts would be needed.
Dr. Boolell: Mr Speaker, Sir, when we look at the three requests for proposal bids, unsolicited bids that were received, it is crystal clear that SUDS had already acquired second-hand equipment, which it had parked in the yard of St. Aubin. On top of that, Médine was not given the time to submit its project properly, because of the time lag.
Mr Speaker: Can you take your seat, hon. Dr. Boolell? You are stating a fact! You cannot do that. You should put questions.
Dr. Boolell: I am coming to the fact.
Mr Speaker: I have said that you can lay some basis for your question. Now, you are making a statement!
Dr. Boolell: Then, when we look at the requests for proposals, I would like to ask the Minister what was the capacity of the generating units stated by Médine in the unsolicited proposal. Did not Médine advise the CEB, the Steering Committee or the Government that they could not quote for a 30 megawatt generating unit deliberately being done to suit the needs of St. Aubin? This is the fact, Mr Speaker, Sir.
Mr Speaker: There was no question, hon. Dr. Boolell! What do you want me to do? From what you have said, there was no question put. What you want is that I dance to your tune, and now Members ask me to take my seat. This is the world going the other way round. You have to go by the Standing Orders. You cannot make statements that you cannot substantiate. You have to put questions.
Dr. Boolell: I have put a question. I asked the Minister what was the capacity of the generating units stated by Médine in the unsolicited proposal and whether Médine did not advise the CEB, the Steering Committee or the Government that they could not quote for a 30 megawatt generating unit, confirming what I have stated all along, namely that it was tailor-made to suit the needs of St. Aubin. That's a fact, Mr Speaker, Sir!
Mr Speaker: Order!
Mr Ganoo: Mr Speaker, Sir, I do not wish to say that the hon. Member is standing here as the mouthpiece of Médine S.E. But, the hon. Member should know that…
Dr. Ramgoolam: On a point of order, Mr Speaker, Sir. Would you allow this? Do you think that this is correct?
Mr Ganoo: I am saying that he is not the mouthpiece. I do not think that the hon. Member is the mouthpiece of Médine S.E. This is what I said.
Dr. Boolell: The hon. Minister has to withdraw what he said.
Mr Speaker: If the hon. Member had asked the Minister a question, he would have to listen to the reply. But, you are making a statement. Unless I can get the co-operation of each and every Member of this House, I will not be able to apply the Standing Orders and control the House. This is why I am asking the hon. Member that he has to co-operate first and then I will ask the Minister to do the same. But, if you are coming with a statement in your question, I will not be able to do so. I think hon. Minister that, in fairness, it is not proper to impute to the Member that he is the mouthpiece of Médine.
Mr Ganoo: Mr Speaker, Sir, I am not imputing anything. I am stating as a fact that I do not think that the hon. Member is the mouthpiece…
This is true!
But, true it is that Médine did not participate in the bidding exercise. As far as I remember, Médine did make certain representations to the CEB and it decided not to participate in the bidding exercise. Too bad! But, I would also like to inform the hon. Member that, even in the present coal-bagasse exercise, Médine has not bid.
I am just informing the hon. Member if he does not know.
Mr Speaker: Order! Order, please!
Dr. Beebeejaun: I put the question very simply. Was the CEB or any of these institutions mentioned, informed that Médine would not participate in the bid exercise? That's the question.
Mr Speaker: There is a question put and the Minister will have to answer the question.
Mr Ganoo: I have said, Mr Speaker, Sir, that Médine has made certain representations at a point in time and then at the material date when the bidding was closed, they did not submit any bid.
Dr. Beebeejaun: About the material time, was it before the RFP or after the RFP. The information is before the RFP.
Mr Ganoo: In fact, Médine purchased the documents for the Request for Proposal, Mr Speaker, Sir. There was also a pre-bid meeting with bidders. As far as I remember Médine did attend the pre-bid meeting and Médine made representations, but it had to comply with the requirements of the RFP. Then finally they decided not to submit any bid.
Dr. Beebeejaun: Was it before the RFP was issued?
At the pre-bid meetings! No, it's before.
Mr Duval: Can I ask the Minister how he can reconcile on the one hand savage cuts of electricity supply of ti dimounes who owe a few thousands rupees to Government and, on the other hand….
Mr Speaker: Hon. Duval, take your seat. You are making a statement, you should ask questions.
Mr Duval: … to explain how it can be that the same Government acts like this? Savage cuts for a few thousands rupees and deliberately waste hundreds of millions of rupees annually through bad management and God knows what other unexplained reasons on the purchase of electricity from the private sector!
Mr Ganoo: Sir, firstly I have, on several occasions, answered questions put to me about the interruption of electricity supply for consumers who, unfortunately, do not pay their electricity bill within the delay which is given to them by the CEB. I have answered several questions on this issue. But I do not subscribe to the opinion of the hon. Member that there has been bad management at the CEB. May I remind the House that the CEB has decreased its overdraft of Rs1.6 billion to only Rs280 m. This is not bad management!
Mr Speaker: Order! I am calling the House to order. Time is almost up and I'll allow the hon. Leader of the Opposition a last question.
Dr. Ramgoolam: Mr Speaker, Sir, I have two questions. First of all, can the Minister say whether it is a fact that in 2008 CTDS would produce around 160 gigawatt of electricity power at a unit cost that will cost more than Fort George which will cost us Rs128 m? Is that a fact or not?
Mr Ganoo: Mr Speaker, Sir, I have already answered that in 2008 at 85% of the load factor it will cost Rs2.51.
Dr. Ramgoolam: I must point out to the Minister that 85% is not realistic and I do not know why he is speaking about that. Can I ask him who was the project leader when this evaluation exercise was done and who was the representative of the Ministry of Finance at that time and is he still a member of the Board?
Mr Ganoo: Mrs Donna Leclair was the Project leader and at that time the representative of the Ministry of Finance on the Board was Mr Jean Mée Desvaux.
Mr Speaker: Time is up. Questions to the Ag. Prime Minister.