E&Y for fresh Sasan power project bids

Ernst & Young (E&Y), the financial consultant to the beleaguered 4,000 MW Sasan ultra mega power project in Madhya Pradesh, has recommended that the award to the Lanco-Globeleq combine (now Lanco-Jindal) be annulled and fresh bids be invited.

The recommendation from E&Y has been made even as its own role in clearing the original bid has come in for censure.

The consultants have told the Power Finance Corporation (PFC), the nodal agency for implementing the project, that Globeleq of Singapore had misrepresented financial and technical details.

Sources close to the developments said all the bidders were required to submit details such as capacity and surplus cash flow of the companies participating in the bid. This included subsidiaries and associate companies in which they own 25 per cent or more.

This information was to be certified by the board of directors and a chartered accountant. "The Lanco-Globeleq bid was accepted because it was signed by the board of Globeleq Singapore and a chartered accountant," the source said.

Official sources, however, say E&Y will have to assume some responsibility for the fiasco, which threatens to delay the project.

E&Y's recommendation is similar to those of bankers and officials who have suggested rebids by unsuccessful bidders in the light of irregularities in the original bid made by the Lanco-Globeleq consortium.

The consortium subsequently saw a change in ownership, with Globeleq being replaced by Jindal Steel and Power as Lanco's partner. Both Lanco and Jindal are promoted by Congress MPs.

Crucially, E&Y's advice for rebidding comes even as the second-best bidder "� Reliance Energy "� is learnt to have told the government that it automatically qualifies to bag the project.

According to a clause in the bid document, if the successful bidder, to whom the letter of intent has been issued, does not fulfill any of the conditions specified, the bidder offering the second lowest tariff will be considered for award of the letter of intent.

However, neither E&Y nor PFC subscribes to this view. Sources familiar with the developments say the second-best bidder cannot be considered because the original bid documents did not envisage a situation of the kind that has arisen with Globeleq.

According to the source, the project goes to the second-best bidder only if the first does not fulfill criteria like raising money and so on. There is no provision in the bid document for what is to be done if the bidder is disqualified on grounds of misrepresentation, the source added.