Vol. 5 Num 824 Wed. September 20, 2006  
Front Page

Dark Power Sector Secenario
Hefty investment carrot gets unsolicited deals
Yet another dubious foreign company seeks coal mining licence

In the last two years, Bangladesh received a number of mammoth investment proposals for the energy sector from foreign companies but barring the reputed Tata, all the company profile is as obscure as their actual intentions.

This trend continues with the recent revival of an inactive one-year old memorandum of understanding (MoU) with obscure South Korean company Luxon Global. This company wants to invest $ 1 billion in the energy sector and seeks a coal mining licence in the context of the Phulbari mining incident.

Based on the success of incompetent Canadian oil company Niko Resources in bagging an energy sector deal through an opaque process in 2004, a number of unknown companies suddenly appeared in Bangladesh with massive investment proposals to bag deals in a similar non-transparent fashion.

In October last year, Asia Energy proposed to invest $ 2 billion in Phulbari coal mining, where it claimed to have invested more than $20 million in studies of the mine. In May 2005, Vulcan Energy, US, proposed to invest $1.6 billion in fertiliser, coal and power production. In 2004, US-Irish joint venture Cadogan-Manning proposed to build 450 MW Meghnaghat-3 power project. Finally, in July last year, a South Korean company named Luxon Global Company signed a MoU on investing $ 1 billion in coal and power production, seeking coal mining licence.

All these companies in their proposals claim to be big and competent.

In reality, none of these companies has any experience in the energy sector. These do not have any profile and apparently they were created only to bag unsolicited deals in Bangladesh with the help of a section of policymakers.

According to a briefing of the Board of Investment (BoI), Global Vulcan Energy International posed to be a large company owned by Bill Gates' associate Paul Allen. But a press statement from Paul Allen in Seattle, US, ruled out his links. A follow-up press report from the US revealed that it is basically a one-man company, having no background.

Cadogan-Manning is a similar case of zero profile. Cadogan Consultants Ltd was formed by a management buy-out of Rendel Palmer & Tritton (Scotland) Ltd in 1997. Manning Industries is a company based in Texas mainly involved in retrofitting used equipment.

The latest in the line is South Korean Luxon Global company that signed a MoU last year on investing $ 1 billion in coal mining, power plant, fertiliser plant, gas transmission and infrastructure development sectors. Quoting energy ministry officials Bangladeshi press last year and again in recent weeks reported that Luxon is incorporated in Seoul, and is a globalising corporation operating in various areas of South Korea and other countries of the Asian region.

But a source quoting his business connections in South Korea said this company is yet another one-man show where a handful people are trying to build a business using their high connections in the Korean government. The Luxon chief apparently used his connections to obtain courtesy letter of interest from some reputed Korean companies and submitted those to the government to create a positive impression.

All Internet web-links of Luxon, Cadogan-Manning, Asia Energy and Global Vulcan appear only linked with Bangladesh. They have no other record of involvement with any other country.

The Bangladesh embassy in Seoul on August 25 held a meeting with the Korean vice minister of energy and the chief executive officer of Luxon. The vice minister said the one-year MoU expired in July and it needed to be renewed. And he would like to visit Bangladesh next month (this month) to expedite Luxon's proposal. "The Korean side is 100 percent more than ready but we have not heard of any progress from Bangladesh's side," the embassy wrote to Dhaka quoting the vice minister.

Though Luxon in its MoU had committed to start feasibility study within six months of signing of the MoU and complete it by another six months, it actually did not do anything. On the contrary, the Luxon chief on August 14 met the Bangladesh ambassador telling him about his interest in investing $6 billion, not just 1 billion, on the basis of the MoU. The embassy has recommended to the government renewal of the MoU and going ahead .

During the signing of the MoU last year, Luxon Global chief Seung Youb Lee said his company targeted developing Asian countries, including Bangladesh, and for this wanted to invest in different sectors as the region still requires investment in infrastructure development and power production.

"We are interested to invest in Bangladesh for its vast quantity of unexplored coal and cheap and available labour forces," he said.

According to the MoU, Luxon will invest $150 million in coal mining, $350 million in coal-based power plant, $150 million in gas-based fertiliser plant, $200 million in developing NGL/LNG (natural gas liquids/liquefied natural gas) and gas transmission, and $150 million in infrastructure development.

"For inexperienced companies like Niko Resources or Asia Energy, Bangladesh is a guinea pig which helps them bag extra funds from share markets in their own countries. Other companies like Chinese Harbin also use Bangladesh as a guinea pig to gain work experience by delivering foul products as in case of the malfunctioning Tongi 80 MW plant. This has become possible because since coming to power, the BNP-led alliance government has virtually closed all open tenders and opted for only shady deals," noted an energy industry expert.