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Economics

Modernization of Bishkek Heating and Power Plant: making gross mistake

The Parliament has ratified an agreement with the Export-Import Bank of China on the reconstruction of the capital's Heating and Power Plant (HPP) at the end of 2013. Chairman of the Committee for Fuel and Energy Complex and Subsoil Management Kozhobek Ryspaev immediately admitted that he did not approve the decision of his colleagues to engage the Chinese company TBEA in reconstruction of the plant, but he could not oppose the entire system. And later on he even stated that the decision was taken under pressure of the Government. And only when the document has been signed by the President, the deputies realized that they made haste.

At the crossroads

 Another attempt to modernize Bishkek HPP instantly provoked heated debates among the officials, deputies and experts. The project will be implemented at the expense of borrowed funds, so the price is a basic requirement in selection of a contractor. But not for power engineers, who are lobbying the interests of a private company. There appeared a lot of rumors about the Minister of Energy and Industry, he was even accused of private ties with the Chinese! Representatives of TBEA, allegedly, help him financially, and they are constructing an apartment house on the south highway. But Osmonbek Artykbayev did not hasten to explain his obvious interest in the project that just stirred up public interest.

Meanwhile, members of the Supervisory Board on transparency of fuel and energy complex initiative clang all the bells, saying that Electric Stations JSC violated the provisions of the law on public procurements when signing the agreement. Selection of a contractor should be made openly, transparently, and in the case of single-source procurement it was necessary to get the consent of the relevant state agency. Public hearings have shown that there is no feasibility study on the project, criteria and procedure for selection of a contractor were not presented as the management independently chose the company.

Neither the Energy Ministry, nor Electric Stations JSC properly analyzed the cheaper offer of another Chinese company - China Machinery Engineering Corporation (CMEC), did not respond to the invitation to visit factories for production of basic power equipment and discuss details of the project.

In general, two Chinese companies - TBEA and CMEC- are competing for the profitable project. The first one proposed to reconstruct Bishkek HPP for $ 386 million, the second for $ 356 million. Both companies, as they themselves say, earned the support of the Chinese government and also paid for foreign trips of Kyrgyz deputies to their facilities.

Cursorily run through 

Chynybay Tursunbekov, Muradyl Mademinov, Toktogul Tumanov, Malik Osmonov, Abdulatip Rezhevaliyev, Iskhak Pirmatov, Karganbek Smakov, Raikan Tolgonov, Azamat Arapbayev, Abdimutalip Kochkorbayev, Baktygul Mamatov, Ravshan Dzheenbekov were the first who left for China on invitation of TBEA company.

Following his trip to Hong Kong, Chynybay Tursunbekov tried to justify his colleagues , explaining 24.kg news agency that they only took the invitation and did not take any obligations on lobbying for TBEA. The MPs together with the Energy Minister visited the facilities, including HPP and discussed the scale of production and sale of low-voltage electrical equipment. "We have seen with our own eyes that the production output of this company is huge. Its GDP is comparable to the entire GDP of Kyrgyzstan. It is engaged in construction of Datka-Kemin power transmission line. "But it does not mean that we are ready to support it unconditionally. If another company invites us to look at its capacities, we will go there. But finally we will support only a company that offers to upgrade our HPP on the most favorable conditions for the country," Chynybay Tursunbekov said.

By the way, all the deputies who visited Hong Kong, voted "for" ratification of the agreement, except Iskhak Pirmatov, who was absent at the meeting.

The second deputy trip at the expense of Chinese CMEC company took place in late December. Kyrgyzstan was represented in Izmir (Turkey) by Bakit Sharsheev, Zamir Bekboyev, Kantemir Murzabekov, Nurbek Alimbekov, Daniyar Terbishaliyev, Mirlan Bakirov, Nurkamil Madaliyev, Nurbek Murashev.  Zamir Bekboyev, who supported the ratification of the agreement and TBEA company, changed his mind after a trip to Izmir. "As for Bishkek HPP modernization the problem is not in choosing a contractor but in external borrowings. There are claims to TBEA on economic and technical parameters. The facility will be built at the expense of credit, so one can write any sum. The cost of work may increase. Representatives of TBEA easily say they are ready to build it by $ 30 million cheaper. The project cost estimation is not made. The figures are pulled out of a hat," Zamir Bekboyev said.

There is another question: why deputies did not reject the document if they have reasons not to trust the contractor who, in addition to everything, does not have experience in construction of HPP?

Government lobby 

Shortly before ratification of the agreement, there was held an extraordinary meeting at the request of the government, where deputies decided to unconditionally support the project. "Many MPs did not even have time to look through the documents, so they had questions why the government is lobbying for the interests of the Chinese company and did not give time to study other offers. Officials explained that Eximbank of China allocates soft loan, so it dictates what for a company will carry out the works. Deputies wanted to visit another Chinese company, which has applied for reconstruction, but at the last moment were refused. First, representatives of CMEC invited us, but got a refusal just right before the trip. I think that the Chinese party called them and ordered to cancel the trip," Kozhobek Ryspayev told.

Later on the government asked the relevant committee to speed up ratification of the agreement as Eximbank wanted to transfer the first tranche on December 10. "The Cabinet hurries us. We warned the Minister of Energy and Industry Osmonbek Artykbayev that he will be responsible for lobbying of the Chinese company," Kozhobek Ryspayev said.

However, the warning had no effect and deputies supported the lobbyists and even did not abandon the trip to Turkey. And after the voyage they realized they have made a mistake and it is possible that there were violations in ratification process. Raykan Tologonov noted at a committee meeting that the Justice Ministry should assess legality of the ratification of the agreement by Parliament. "If the laws were violated, we will denounce it. The Ministry of Justice did not provide an opinion on selection of the contractor. The Prosecutor General's Office will be appealed in case of violations," he said.

Members of the Public Supervisory Board have repeatedly said that a contractor should have been selected through a tender. However, Electric Stations Director General Salaydin Avazov believes it was impossible. "If we had money for reconstruction, we would have held a tender. And since there is no money, we have agreed to the terms of Eximbank," he said.

There is one more mistake, made by the power engineers. TBEA was also contracted for construction of Datka-Kemin power line and substations without a tender. And this time Eximbank recommend it as the contractor, as it is funding the project. Consequently, if the deputies denounce the just ratified agreement, then the previous agreements should be denounced, but millions of dollars have been already spent on them.

Right for mistake?

Explanation of specialists did not convince the deputies, and they began to doubt the correctness of the hasty decision. Chairman of the relevant committee Kozhobek Ryspayev complained to 24.kg news agency that even the MPs make mistakes. "We are also misled. The situation is complicated. In a few years we will have to repay $ 600 million already, so we can not carelessly treat external borrowings. It is not the point whether it is TBEA or CMEC. We all make mistakes. At year end we were hurried to hold ratification, otherwise the bank will not allocate money. The Government said only TBEA was chosen as contractor. If the Ministry of Justice reveals violations there will be denunciation. As a patriot, I would like to save money. We're just a little late. Deputies went to Turkey and opened our eyes. Previously, we could not do it. Government hurried us. It will continue lobbying for TBEA despite the lack of feasibility study, there is only a technical proposal," deputy explained.

Parliament has once again shown its low aptitude. Trying to lobby for a favorable company, deputies have driven themselves into a corner, and now shelter themselves under the fact that they could not defend the interests of the state and regret about it. We can only guess how many bills the Parliament passes in hurry and how they will come back to bite us later. After all, the rush is needed only in two well-known cases ...