Investigate secret deal: Labour

  • 5th July 2019
  • 2019
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Fiji Labour Party has called on the FCCC to inquire into the secret FEA/EFL agreement with Telesource (Fiji) Ltd and its successor Pernix (Fiji) Ltd, to operate and maintain its diesel stations at Kinoya and Vuda.

The 36 MW Kinoya Extention plant built by Pernix at a cost of $30m

Details of FEA’s agreement with Pernix, a US-based company, dating back to 2003 have never been disclosed.

In January 2016, Pernix was granted a 13-year operation and management contract for the 36 megawatt Kinoya Extension plant in Suva which it had built for FEA at a cost of $30m.

The contract to build was awarded in 2014, the same year when Fijian Holdings acquired a 25% stake in the company by way of share transfers.

The same year, Pernix was awarded a separate $4m contract for the Kinoya Greenfield Power Station substation project at the same site.

According to information on its website, Pernix stands to generate an additional USD 42 million (F$87m) in gross revenue through to 2028 from the entire deal with EFL (the new agreement and the existing contract extension).

In 2003, FEA under the chairmanship of Joe Mar had signed a 20-year deal with Telesource (Fiji) Ltd (now Pernix) to manage its two diesel stations. Labour had questioned the deal in Parliament at the time and had called for details of the agreement to be made public.

It remains a secret to this day. Labour said at the time that the deal was questionable as the contract was awarded to Telesource without expressions of interest being invited from other companies.

Since details of the agreement are secret, it is not known whether its terms are fair and reasonable to FEA/EFL and the people of Fiji.

Worryingly, the FEA/EFL annual reports provide no information about its contractual arrangements with Telesource/Pernix (Fiji) Ltd or the payments made to it for the O&M contracts or for other capital works awarded to it.

But according to the Pernix website the 25- year contract involves operation and maintenance of the diesel power stations and to “sell electrical energy produced on a wholesale level at a contractually determined rate”.

This reveals that EFL is buying diesel generated energy from the Pernix operated stations at Vuda and Kinoya. This is indeed peculiar when EFL pays for the fuel and owns the power stations.

Important question is: What is EFL paying for Pernix-generated thermal energy? What is this “wholesale rate”?  Is there a mandatory minimum payment, irrespective of the amount of energy generated?

In its submissions to the Fijian Competition and Consumer Commission, Labour has called for a thorough investigation to determine whether the deal is reasonable and fair to EFL and the consumers, and whether proper procedures were followed in the award of the contracts.