• Deadline extended twice from 2 April to 2 May; now to 24 June 
• Performance bond specifications set for revision in current tender
• Cabinet decision on specification revision tomorrow

With only three months remaining before the next coal unloading season begins, the closing date for the long-term tender to procure 50% of the coal requirements for the Norochcholai Coal Power Plant has been extended for the second time to 24 June, The Sunday Morning learns. 

The tender, covering the periods 2024/’25 and 2025/’26, aims to secure a total volume of 2.25 million MT of coal.

It is reliably learned that the Standing Cabinet-Appointed Procurement Committee (SCAPC) has extended the tender deadline to allow for changes to one of the technical specifications in the previously-issued tender.

Accordingly, the tender, which was initially scheduled to close on 2 April, was first extended to 2 May. It has now been extended again, with the new closing date set for 24 June.

Speaking to The Sunday Morning, Lanka Coal Company Ltd. (LCC) Chairman Shehan Sumanasekara said the specifications stated on the performance bond would be changed in the current tender.

“Currently, the performance bond is set at 10%. This presents a problem as we have requested cargo in two parts: one part on a long-term basis and the other as spot cargoes. Out of the total 2.25 million MT, only 1.1 million MT will be delivered in the coming season starting this September and next April. The remainder of the long-term tender is scheduled for delivery in the season starting next September, creating a long gap,” he stressed, adding that as a result of the long gap, the key suppliers had raised concerns about this arrangement.

“The suppliers will have to block 10% of the contract amount as a performance bond. When they block such a huge amount, they incur interest charges, which they will pass on to us in the tender pricing. Consequently, our pricing could be higher than necessary, whereas a lower performance bond might allow suppliers to offer more competitive prices,” Sumanasekara explained.

Elaborating further, the LCC Chairman noted that even after the first half of the cargo was supplied, the 10% performance bond remained in place for the entire two-year period, as per the specifications given in the current tender. 

“But through the expected changes to the technical specifications, we are planning to release half of the performance bond once the supplier completes the first portion of the cargo, fulfilling half of their obligation,” he said.

“This adjustment is a fair request from the suppliers,” he explained. “By doing this, we provide them with the flexibility to offer better pricing. Moreover, this approach encourages more participants to join the tender process, potentially increasing competition. Allowing suppliers to have part of their bond released midway through their contract obligations can lead to more favourable pricing and a higher number of bidders,” he stressed.

However implementing this change requires a technical modification to the tender, which has not been made yet because it requires a Cabinet decision. Therefore, he explained that the date had been extended. “Typically, after a decision is made, bidders are given a two-week period to prepare for the change,” he added.

As The Sunday Morning learns, the Cabinet is scheduled to discuss this matter tomorrow (3).

However, the LCC Chairman was hopeful that they would be able to complete the tender process and award the tender by early August. 

“When the tender closes on 24 June, the Technical Evaluation Committee (TEC) will take approximately three days to finalise its evaluation. After that, the tender must go to the SCAPC and this process will take about a week. We also need to provide all suppliers a 14-day period for appeals. Once the appeal period is over, and assuming no appeals are received, the process moves to the Cabinet, which takes another week. 

“Following the Cabinet decision, it will take about 10-15 days for the Treasury to complete its observations. Generally, when we receive a verbal confirmation from the Cabinet, we are confident that the decision is finalised. Although we won’t be able to sign the agreement immediately, we can issue a letter of award. By early August, we should be able to provide a detailed plan,” he explained.

Nevertheless, the LCC confirmed that it had already secured nine cargoes for the next season. “We have nine cargoes from the previous term, which will be sufficient for two months, covering September and October. We will start new cargoes from November; we have enough time,” he said. 

Elaborating further on the previous season, the LCC Chairman said there were two more shipments yet to be unloaded as they were caught in bad weather. “We have sufficient coal stocks for Norochcholai,” he reiterated.

The LCC is adopting a slightly different approach for the long-term tender this time by floating a single tender to procure only 50% of the total requirement for two coal unloading seasons. This will include 50% of the requirement from a long-term contract tender and the rest from spot tendering. However, the LCC confirmed that even with the changes made to the procurement nature, coal would be procured at a fixed rate for two terms based on index prices.

Earlier, the LCC expected 19 registered suppliers, including companies representing Russia, Indonesia, Australia, and the UAE, to submit their bids for the long-term contract tender. The procurement will be based on an upfront payment mechanism.

Coal tenders have been marred by controversy in the recent past, leading to last-minute cancellations. Some of the suppliers selected by the LCC did not proceed as expected, contributing to the challenges faced in the procurement process. Lakvijaya provides nearly 900 MW of energy to the national grid, accounting for about 40% of the country’s total energy requirement.