Botswana Power Corporation (BPC) was aware even before the award of the multi-billion Pula Morupule B contract to Chinese contractors that the contractors could not deliver durable boilers.
Documents passed to the Sunday Standard reveals due diligence lapses in the award of the P11 billion tender to CNEEC. The technical partner DEC which the Chinese Company had listed in their tender bid dumped them after the pre-qualification state and teamed with a competitor Zelan who they felt comfortable with to deliver the project. This was before the Chinese ambassador to Botswana warned that the Chinese Contractor did not have the capacity to deliver a project the size of Morupule B.
CNEEC found themselves pre-qualified but without a technical partner. BPC cut them some slack and allowed them to look for another partner before they could qualify to be awarded the contract.┬á Sunday Standard has raised documents revealing that on June 28th 2007 CNEEC signed a consortium agreement with a new partner, a Chinese plant manufacturing enterprise called SBW.
Although SBW is a large engineering plant manufacturing enterprise in China that is involved in the development and fabrication of various power station ancillary mechanical plant such as boiler feed pumps ÔÇô BPC was aware that they could not be trusted to deliver durable boilers for a plant the size of Morupule B.
According to an agreement drafted in September 2007, the BPC technical team stated that, “given the importance of the boiler system in the production system cycle, CVEEC has made an undertaking that, although the CFB boiler will be manufactured in China, the basic and detailed engineering design will be done with the cooperation of Lentjies Germany. Lentjies Germany will participate in the quality control, site construction and commissioning as well as managing the production time schedule of the selected manufacturer. During the defects notification period, the local representative of Lentjies Germany will assume full responsibility over the boiler works.”
So the BPC technical committee made a recommendation that “the Board Tender Committee approves the pre-qualification of the CNEEC ÔÇô SBW Consortium to participate in the EPC/ Turnkey project construction tender for the Morupule B power Station Project on condition that the consortium utilises CFB Boilers manufactured in China with the basic and detailed engineering design being done with the cooperation of Lentjies Germany.”
Documents passed to the Sunday Standard suggest serious due diligence lapses because at the time the recommendation was made, Lentjies Germany’s future was uncertain.
At the time, the European Commission had a month before (August) initiated an in-depth investigation under the EU Merger Regulation into the planned acquisition by Austrian engineering company Austrian Energy & Environment AG (‘AEE’) of Lentjies its German competitor. Although the European Commission ultimately approved the merger, even before Lentjies settled under its new parent company AEE, the Australian company went bust.
In 2009, a few months after the ground breaking ceremony of Morupule B, AEE the new parent company of Lentjies was insolvent.
Lentjies was part of the Austrian AE&E Group (subsidiary of A-TEC Industries AG), which filed for insolvency in 2010. The takeover financial advisors, Commerzbank note that due to the high complexity in the insolvency it was extremely difficult to structure a successful transaction. The takeover was successful; however this did not exorcise the BPC boiler system phantom which is now frustrating the multi-billion pula project.
Minerals Energy and Water Resources Minister, Kitso Mokaila told parliament a few years ago that problems in the Morupule B project “were compounded by other problems, among them, blockages and a steam tube leak on boilers one and two respectively.”