BON Consortium failed to meet its May 28 deadline for financial closure blaming the country's "political instability". On May 27 it requested the government to allow an additional seven and a half months time for the financial closure.

In a letter Monday, the PDB requested BON Consortium, located at Orion House in Tejgaon, to immediately submit a performance security deposit of $ 10 million.

"The extension of required Financial Closing Date will be finalised after submission of Performance Security Deposit through discussion/ consultation with you, keeping Commercial Operation Date unchanged," said the PDB in the letter.

The letter added that the existing Power Purchase Agreement (PPA) and Implementation Agreement (IA) with BON would be amended in line with the revised financial closure deadline.

The PDB has taken this decision based on BON's May 27 letter, accompanied by another letter of Bahrain based Capital Management House (CMH) -- that is apparently arranging the financing for the inexperienced consortium.

Officials and power industry players strongly doubt whether BON would ever be able to carry out this project as Obaidul Karim and the consortium's "official" leader Steag from Germany is nowhere to be seen. To make matters worse, they say the global cost of setting up of a power plant has significantly gone up and that will make it even more difficult for BON to set up this plant without incurring huge loss.

Apparently Belhasa group -- the consortium's other partner -- is the only visible 'moneyed' partner of Orion Group in the deal. But the UAE based Belhasa group is not a power plant developer and its website does not even mention any project in Bangladesh.

Following the May 27 letter and legal homework, the PDB on July 4 concluded that as per the contract, the deadline can be extended for some time as long as the Commercial Operation Date (COD) of the power plant remains unchanged and that BON submits the Performance Security Deposit.

It added that the financial closure of Meghnaghat 1 was signed after a delay of 20 months, instead of seven and a half months, in April 2001.

The PDB further observed that if BON fails to meet the COD, it would have to pay a penalty of $ 45,000 daily for a maximum of $ 30 million.

BON earlier missed a deadline to pay up land rentals and other fees on January 21 and faced a notice of "Project Company Event of Default" to pay up Tk 6.22 crore by February 22 or face cancellation of the contract. A representative of Belhasa Group through submission of that money at the eleventh hour saved that cancellation.

During that time, the Belhasa representative proposed the government that it would take over Orion's share (only 16 percent) and carry on the project. Belhasa also guaranteed implementation of the project, one of its executives told the power ministry in February.

Obaidul Karim, who created the BON Consortium to bag power deals using his connections with the Hawa Bhaban, is wanted by police in different graft and criminal cases for swindling Tk 594 crore from Oriental Bank. Besides, he is accused of heavily bribing a large number of former prime minister Khaleda Zia's close associates to unfairly bag various deals including the Saidabad-Jatrabari flyover project where the Belhasa Group is partnering with Orion.

BON never actually gave the bid that was selected for this power project and it actually submitted its name as one of the two partners of a Japanese bidder Nisso Eiwi, which has the experience to qualify for building such a power plant. Nisso however disappeared from the scene in 2004 and Orion brought in another German company, Steag, showing it as the lead bidder.