Lanco blames Globeleq for trouble over Sasan

Lanco blames Globeleq for trouble over Sasan
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First Published: Tue, Apr 29 2008. 01 34 AM IST

Blame game: Lanco Group chairman L. Madhusudhan Rao
Blame game: Lanco Group chairman L. Madhusudhan Rao
Updated: Tue, Apr 29 2008. 01 34 AM IST
In a bid to distance itself from controversy, Hyderabad-based Lanco Infratech Ltd, the original winner of the Sasan ultra mega power project (UMPP) that was eventually disqualified, is looking to pass the blame to its erstwhile partner, Houston-based Globeleq Generation Ltd.
Blame game: Lanco Group chairman L. Madhusudhan Rao
Lanco’s move comes a day after The Times of India and the Mail Today reported that an in-house vigilance unit of state-owned Power Finance Corp. or PFC, the agency that awards UMPPs, recommended that audit and consulting firm Ernst and Young, or E&Y, which had served as a bid process management consultant, be barred from all power projects of the government.
The vigilance unit has also recommended action against PFC employees and members on the board of Sasan Power Ltd, a special purpose vehicle created by PFC for the project.
Mint had reported on 11 April that PFC was shopping for a new consultant for the UMPPs that were yet to be awarded except the one at Tilaya at Jharkand. E&Y was the consultant for the three power projects awarded, at Sasan, Mundra, and Krishnapattnam, and is also advising PFC on the one at Tilaya.
“We had placed the bid for Sasan in a consortium where Lanco had 30% shareholding and Globeleq had 70% shareholding, making them (Globeleq) the lead stakeholder. The submissions were made by us and them. Our submissions have been clear and there have been no issue with them. However, there are some anomalies in the submissions made by Globeleq. They being a huge company, there were some constraints on their part,” said L. Madhusudhan Rao, chairman, Lanco Group.
Globeleq did not immediately respond to the questions mailed by Mint.
The Lanco-Globeleq bid was disqualified after these so-called anomalies were discovered. The power ministry started examining the bidding for the project after the Central Vigilance Commission, or CVC, a body that looks into the functioning of government departments and agencies, raised questions about the process. It asked the government “to review the role played by consultant (E&Y), various committees and the board of SPL (Sasan Power Ltd)”.
V.K. Garg, PFC chairman and managing director, declined to comment.
E&Y denied any misconduct and its spokesperson, in an e-mail, said: “There have been reports in some sections of the media about Ernst & Young’s role in the Sasan Ultra Mega Power Project. We would like to state that we have not received any formal communication on this matter for several months. Certain issues had been brought to our notice in November, 2007, to which we had duly responded in December, 2007. We reiterate that as financial advisors, we have complied with the guidelines outlined in the Request for Qualification/Proposal (RFQ/RFP) for bid evaluation and that there has been no lapse on our part.... ”
The government is yet to award projects under the UMPP scheme in Jharkhand, Tamil Nadu and Orissa.
The Sasan project was the first of the projects under the scheme that were to be set up between 2007 and 2017. A consortium comprising Lanco and Globeleq Singapore Pte Ltd, a subsidiary of Globeleq had initially won the bid to develop the project. Lanco’s woes began soon after the project was awarded, as Globeleq started hiving off its global operations and Globeleq Singapore’s stake in the Sasan project was acquired by Lanco Infratech, the flagship company of Lanco Group, and Jindal Steel and Power Ltd (JSPL).
Led by Reliance Power Ltd, several losing bidders quickly mounted an aggressive campaign to try and disqualify Lanco because the nature of the winning consortium had changed. After the disqualification of Lanco, Reliance Power Ltd was asked to match the winning bid which it did.
The SPL board refunded Rs119 crore of the Rs120 crore bid bond submitted by Lanco Infratech and Globeleq Singapore.
PFC made a pitch for lenient treatment of Lanco in the Sasan case even before the committee looking into the bidding submitted its findings, as reported by Mint on 18 March.
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First Published: Tue, Apr 29 2008. 01 34 AM IST