FLP calls for investigation into a conflict of interest between Abdul Khan’s privately owned company, Pacific Renewable Energy Ltd, which has signed a 12 MW power supply agreement with FEA when he is actively pushing FSC to embark on co-generation projects at its mills.
Khan’s biomass facility is yet to be constructed in Lautoka and it appears that its construction may be timed to coincide with the Cogeneration works at the Rarawai Mill considering that the agreement with FEA was signed more than 2 years ago.
“It smells of corruption at the highest level and should be nipped in the bud immediately,” said a highly placed FSC source.
Khan used to run a power generation company in New Zealand. This naturally raises questions about the excessive cost Abdul Khan is quoting for the purchase and installation of the cogeneration plant at Rarawai.
It is public knowledge that Khan (FSC) is seeking a $US 71 million ($F152m) line of credit from the Government of India through the EXIM Bank of India for the project. He also announced (FT5/9/15) that a further $65m would be raised locally for the project.
All in all, he is a quoting a colossal sum of $F217m for the 40 MW plant at Rarawai mill. We understand, advice from competent sources is that the entire Rarawai project should not cost any more than $US40 million (ie $F80m). This includes the cost of installing the 2x 20 megawatt turbines, building costs of the factory, cost of transporting bagasse from the mill to the cogeneration plant etc.
Abdul Khan is seeking almost three times as much – why? He needs to explain this huge discrepancy in costs. It creates reasonable suspicion of a likely connect between Khan’s own and FSC’s Rarawai Mill project, and must be thoroughly investigated for the sake of transparency.
Our understanding is that the Government of India is also re-examining the excessive quote supplied by FSC ($US71m).
The Fiji Labour Party has in the past questioned the viability of FSC embarking on the cogeneration project at a time when cane supplies have been consistently low.
It is estimated that Rarawai Mill needs to crush 8000 tonnes of cane per day to make the project viable. Currently, the mill is struggling to crush 6000 tonnes a day.
Furthermore, the bagasse from the mill is only sufficient to run the two turbines during the crushing season. Where will Khan find the additional biomass necessary to run the turbines in the off season?
The steam level at the Rarawai Mill is too high (50%) to ensure effective processing of baggase. The steam level at Indian mills for processing baggase is 35%.
The question is: Is Abdul Khan leading FSC into greater debt on hare-brained schemes? What is his motive? FSC is already insolvent and is surviving only on government guaranteed loans.
The 10MW cogeneration plant at the Labasa Mill is already an embarrassment for Khan and FSC. The plant failed attempts to commission it mid last year and has been lying idle since because of technical problems. FSC has borrowed $17m from the Fiji Development Bank for the project
The FDB $17m loan is at an interest rate of 4.5% pa, repayable in monthly instalments of $363,000. It is believed that FSC is unable to meet the monthly instalments, and may seek a revision of the existing loan repayment arrangements.