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Escom in hot soup

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Disagreements over bidding and tendering processes in the award of contracts to supply 70 megawatts of solar power continue to threaten the relationship between Independent Power Producers (IPPs) and the Electricity Supply Corporation of Malawi (Escom).

In a latest development, a Spanish company, Alten (2010) Renewable Energy, has written Escom Board Chairperson, Chief Executive Officer and the Chief Director of Energy in the Ministry of Natural Resources, Energy and Mining, objecting to the evaluation of IPPs who bid for the supply of solar power.

In the letter, titled ‘Objection to Evaluation Process on Bidding Procurement’ [of Solar Power], Reference Number ESC801/ICB/S/ FY 2016/17, Alten faults the tender administrator for not giving the company “an opportunity to review the results” obtained and used to make a determination.

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But Escom says results of the evaluation have not been released.

A letter dated May 11 2017, which Malawi News has seen, says Escom has offered Lot 1-Nanjoka (20 MW) and Lot 4-Golomoti (17.5 MW) to JCM Maltswani Solar Corporation Limited at 8.9422 US cents and 8.9570 US cents, respectively.

“The tariff offered by the preferred bidder for Lots 1 and 4— JCM Maltswani Limited— is significantly higher than the one offered by Alten (which was at 8.650 and 8.750 in lots one and four, respectively), which means that there will be huge cost implications for Escom and consumers over the period of the Power Purchase Agreement,” reads part of the letter, signed by Southern African Development Community Regional Director, Javier Buceta, an authorised signatory of Alten Energy.

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It further says the evaluation process has not been transparent and Escom Tender Administrator did not follow the prescribed evaluation process.

It adds that, according to a resolution of an Escom Board meeting held on May 8 2017, Escom was assigned specific roles but seems to be overstretching its mandate.

It quotes Paper Number 593, paragraph 3.4, titled ‘Basis of The Offer and Guiding Principles for The Next Steps’, as stipulating that Escom would just be responsible for land acquisition.

“This statement is contrary to the Addendum Number 2 addressed by the Director of Procurement to the bidders participating on [sic] the bidding process dated January 19 2017 that stated that ‘Bidders must provide their own sites after award,” says the letter.

Malawi News has learnt that 205 IPPs attended the pre-bidding meeting (in February 2017) where they were briefed about the dos and don’ts before submitting their bids. However, only 21 managed to submit bids by the closing date in February. Five of the companies belong to Malawians.

In a related development, some local and international IPPs have raised concerns over lack of transparency in the same process.

They told Malawi News that all IPPs were asked to submit financial and technical proposals. But on the day of opening the tenders, (February 14 2017), only technical bid documents were opened and the IPPs were told that the financial bids would be opened later.

“We were told that they needed to evaluate first and the preliminary qualifiers would be invited to witness the opening of the financial bids as per requirement. But this process did not happen [and has not happened] until today,” said another concerned IPP who asked for anonymity.

The concerned IPPs allege that the companies which are about to be awarded the contracts might have doctored the figures to suit Escom’s requirements.

“If nothing of this sort happened, why has this happened without involving the others?” questioned another frustrated IPP.

Malawi News has learnt that some IPPs feel that, even though no public announcement has been made, the process has not been as transparent as it was supposed to be.

We can reveal that the Escom Internal Procurement Committee (IPC) approved the award of contracts to some companies (two lots to JCM Maltswani, Phones Renewable Energy and Jackson Engineers India Limited and Voltalia SA as a reserve bidder) on April 13 2017 and the approval of the Office of Director of Public Procurement (ODPP) was granted on April 26 2017.

A projects committee paper from Escom, dated May 3 2017 (which Malawi News has seen) recommends the immediate award of contracts to the companies to achieve programmed schedules to have the Solar PV operational date within two years from the time of offer (May 2019).

The paper says there shall also be a revision of electricity tariffs to ensure that the cost of the power plants in the system’s offered average tariff reflects the prevailing tariffs for Solar PV on the [international] market.

But Escom Public Relations Manager, Kitty Chingota, refused to comment on the matter, arguing that she could not talk about a procurement process which is yet to be concluded as doing so would be going against Public Procurement Regulations

“You will have to wait until the procurement process is concluded and the results are released. This is in line with Public Procurement Regulations; they don’t allow a Procuring Entity to disclose matters of procurement and the results of the same to the public before the process is completed,” Chingota said.

Chingota said: “We will inform you of the outcome of this procurement immediately it is concluded and you will have the opportunity to raise the concerns thereafter.”

She added that, in cases where concerns have been raised on the tender process, the concerned parties contact either the procuring entity or the ODPP.

She added: “Bidders are aware of this procedure. Anyone who participated in the Bid knows that this was a one stage bidding process, where the Bids submitted included both the technical and financial aspects and the same was evaluated as one complete evaluation.”

The bidding process for IPPs has been a controversial issue. Local and international IPPs voiced out their frustrations in November last year, when they wrote the donor community, stakeholders in the energy sector and President Peter Mutharika, informing them of alleged corruption in the award of contracts to some IPPs.

Following this, Mott Macdonald (Malawi government’s special advisor on the procurement of IPPs) instructed Escom to restart the process.

There is $300 million for solar investment at stake.

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