## 3.2 Divestment of Morupule B Power Station – From 2016/2017 Findings 

The auditors noted in 2016 that, Government took a decision in principle to sell Morupule B power plant after the liability period. The 24 months liability period which was scheduled to end in June 2016 was extended for the contractor to make good on the outstanding defects, some of which were impacting on the reliability or availability of the power plant. 

It was noted that Government’s intention was to give priority to Chinese state-owned entity, China National Electric Equipment Corporation (“CNEEC”) in the divestment process. CNEEC, identified as the original build contractor and thus seen as best placed to mitigate the risk which may arise as a result of the complexity and other issues attached to the project. It was therefore expected that the Government would follow a selective tendering process and only if the negotiations between Government and CNEEC would fail, other options would be considered. 

It was further noted that on 28 July 2017 Government issued tender documents to CNEEC and informed BPC to facilitate the tender process. As per the tender notification, the closing date for submission was 23 August 2017 and BPC was further advised to take the following steps: 

 Following up Industrial and Commercial Bank of China (ICBC) regarding the settlement of the loan, including any termination amounts related to the hedge facility 

 Determination of liquidated damages and consequential losses related to the late delivery and poor performance of the Morupule B Power Station. 

In response management was of the view that selective tendering option taken by Government did not provide conclusive evidence that the sale of the Morupule B Power Station would definitely take place due to the following: 

 The tender was an invitation to offer and did not form a contract, 

 Evaluation of tender and negotiations of price and other arrangement would consume substantial time, 

