• Two coal shipments still awaiting funds to unload 

Sri Lanka’s troubled coal acquisition process has listed the controversial technique of spot tendering as the last option to purchase required coal for the October 2022/April 2023 unloading season, The Sunday Morning learns.

The decision to permit the costly spot tender method has been approved by the Cabinet in case its third attempt to secure coal shipments under the tender floated last year fails, it is understood.

However, authorities told The Sunday Morning that the spot tender option, while costlier, would only be used as a last resort.

The Sunday Morning reliably learns that a memorandum submitted to the Cabinet last week has recommended to direct the State-owned Lanka Coal Company (LCC) to take the necessary action to terminate the contract awarded to PT Arista Mitra Jaya after seeking legal advice from the Attorney General’s Department and to award the contract to Coral Energy DMCC, the UAE and Combasst Industry Development Ltd., as a risk-minimising measure. 

The Sunday Morning last week reported that Indonesian-based supplier Arista Mitra had failed to secure a letter of credit from an Indonesian bank, causing delays in supply. 

Accordingly, it is understood that the Cabinet has recommended 720,000 MT to each supplier and to supply in 12 shipments as recommended by the Standing Cabinet Appointed Procurement Committee.

According to sources in the know, Coral Energy DMCC has indicated that it would provide a performance bond worth $ 5 million, with eight shipments out of 12 to be supplied during this coal season.

Meanwhile, Combasst Industry Development is expected to provide $ 100,000 as a performance guarantee, with four shipments out of 12 to be supplied during this coal season subjected to the authentication of documents within the tendered timeline.

“In both cases, the remaining four and eight shipments of the two suppliers will be supplied at the beginning of the next coal season 2023/2024,” the source said.

In addition, it is learnt that the Cabinet has recommended accepting the price of Coral Energy as $ 240 per MT (fixed) for quantities received before 5 May. 

The Cabinet has also recommended negotiations with the contractor to come to a mutually-agreed index base price for the remaining quantities based on the negotiations letters of the bidders submitted on 5 February.

It has also recommended accepting the price of Combasst Industry at a price of $ 230 per MT based on the negotiation letters of the bidder submitted on 5 February. 

Further, it is understood that if remaining shipments of this contract are available after the completion of the ongoing unloading season (April), the Technical Evaluation Committee (TEC) has recommended obtaining the remaining quantities from Coral Energy and Combasst Industry during the next season, which starts from September 2023.

Nevertheless, in the event of failure of the above recommended actions, it has been decided to re-award the order to the supplier which secured the previous long-term tender for the 2021-2023 season, Swiss Singapore Overseas Enterprises Ltd., subject to negotiation of freight charges and payment terms. 

Failing this, the call for a spot tender for the procurement of the required quantities for coal for this 2022/’23 season has been approved.

When asked by The Sunday Morning, LCC Chairman Shehan Sumanasekara said that spot purchasing was the last option and that, given the situation, it would probably be impossible to opt for spot tendering as it would take some time to complete the process.

He added that the LCC acted upon the instructions given by the Cabinet.

When asked about the credit terms of the two new suppliers shortlisted by the LLC, Sumanasekara said that Coral Energy would supply eight shipments and that payments would commence when the stocks were being utilised. 

Furthermore, Combasst will provide a credit term of 200 days on a Non-Resident Rupee Account (NRRA) payment method, according to Sumanasekara.

Meanwhile, The Sunday Morning learns that two coal shipments that have arrived in the country are now waiting to commence unloading due to lack of funds.

“We have informed the relevant authorities. The Ceylon Electricity Board (CEB) doesn’t have the funds. We are waiting for the funds to pay for the two shipments,” CEB Chairman Nalinda Ilangakoon said when contacted by The Sunday Morning.