Ending a protracted bidding dispute over the vital Sasan ultra mega power project, a group of cabinet ministers disqualified Lanco Infratech Ltd and Globeleq Singapore Pte’s winning bid.
The decision, however, sets the stage for intense lobbying and jockeying as the same group of ministers will now meet on 4 August to decide whether to automatically give the Rs16,000 crore project to the original runner-up, Reliance Energy Ltd, or throw it open for new bids.
“Lanco is out of the picture. We will wait for the recommendations of the Sasan Power Ltd (the special purpose vehicle for the project) based on which it will be decided whether new bids will be called or not. No one has been blacklisted,” said Union power minister Sushil Kumar Shinde.
At stake is a 4,000MW project in Madhya Pradesh that is critical to India’s attempts to fix its chronic power shortages. It is one of a series of the so-called ultra mega power projects that are being awarded to companies.
Shinde said that the decision on Sasan would not impact other such projects. But, “there will be greater vigilance and a thorough checklist before the other projects are awarded,” he said.
The winning bid was by a consortium led by Hyderabad-based Lanco and a Singapore subsidiary of the Houston-based Globeleq Ltd, a Bermuda limited company.
However, Globeleq decided to sell some of its global assets, including the Singapore arm. Lanco and Jindal Steel and Power Ltd—one of the losing bidders for the project—then teamed up to acquire Globeleq Singapore.
Some of the losing bidders promptly protested, alleging that the deal changed the original winning consortium and sought Lanco’s disqualification.
Lanco had quoted the lowest bid of Rs1.19 per unit of power generated from the project. This was followed by Reliance Energy’s bid of Rs1.29, Tata Power Ltd’s of Rs1.41, NTPC Ltd’s of Rs2.12 and Larsen & Toubro Ltd’s of Rs2.25 per unit.
The other bidders for the project were Jindal Steel, Sterlite Industries Ltd, Torrent Power Ltd, Jaiprakash Associates and Essar Power Ltd.
The cabinet committee decision is a major setback to Lanco and its current partner Jindal Steel. Lanco Infratech held a 72% stake in the Sasan project with Jindal Steel holding the rest.
Lanco’s shares fell 3.72% to close at Rs234 per share on the Bombay Stock Exchange. A senior Jindal Steel executive declined to comment.
Lanco officials couldn’t be reached despite repeated attempts.
Apart from Shinde, the committee meeting was attended by finance minister P. Chidambaram, deputy chairman of Planning Commission Montek Singh Ahluwalia, law minister H.R. Bhardwaj and Kapil Sibal, minister for science and technology and ocean development.
The Power Finance Corp. acted as the nodal agency for project but took advice from accounting firm Ernst & Young over the bids.
The Sasan power board comprises of representatives of PFC and representatives of states that will procure power from the project.