In what could dent the business of power generation equipment maker Bharat Heavy Electricals (BHEL), the company has been forced to suspend installation of equipment at the 1,320 MW Ennore thermal power station in Tamil Nadu following an order by a division bench of Madras High Court that cancelled the company’s contract, estimated to be worth R9,000 crore, on the ground that the PSU may not have been the lowest bidder.
The contract was awarded to BHEL by Tamil Nadu Generation and Distribution Corporation (Tangedco) in September last year. The high court, in its judgment delivered earlier this week, instructed Tangedco to re-evaluate the bids and pass detailed orders with reasons.
“All units/division are requested to put all supplies/erection/civil activities on hold for 2X660 MW Ennore SEZ TPS with immediate effect in the interest of BHEL till further intimation,” an internal communication of the company issued by the the general manager of power sector marketing A.K Garg said. The notice added that the action plan will be finalised on receipt of the judgment, in consultation with the legal team and Tangedco.
Responding to an e-mail query on the amount of work that the company has already executed, it said : “We have already completed the soil investigation, test piling works, customer site office, BHEL’s site office and other enabling infrastructure works are in progress at the site. Engineering, procurement and manufacturing activities are in progress. Few boiler components have already been supplied and balance are under various stages of manufacturing.”
The petition for cancellation of the contract was moved by a consortium of Trishe Energy Infrastructure Services and Central Southern China Electric Power Design Institute, which claimed to have bid lower than BHEL.
The consortium’s petition, however, was rejected by a single judge bench of the same court in April this year.
Although BHEL reported a 82% decline in profits year-on-year in the first quarter of the current fiscal owing to lower operational income, its order book has grown for the current fiscal. The cancellation of the Ennore project is likely to subdue BHEL growth.
The company has also been struggling to bag projects awarded on competitive bidding process as the last four projects in its order book — with a combined capacity of 6,250 MW — were awarded on mutually negotiated terms by Kerala and Telangana governments. Ennore project was one of the last project the state-run company had managed to bag in the bidding process.