|Wikileaks:||View 01ABUJA1688 at Wikileaks.org|
|Tags:||EINV ENRG PREL ETRD BEXP ECON NI|
|Redacted:||This cable was not redacted by Wikileaks.|
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 ABUJA 001688 SIPDIS DEPT FOR EB/CBA AND AF/W DEPT OF COMMERCE FOR ADVOCACY CENTER DEPT OF ENERGY FOR OFFICE OF THE SECRETARY E.O. 12958: N/A TAGS: EINV, ENRG, PREL, ETRD, BEXP, ECON, NI SUBJECT: NIGERIA: LETTER FROM PRESIDENT OBASANJO EXPLAINS AWARD DECISION FOR DELTA II AND III POWER PLANT PROJECT REF: LAGOS 713 1. Summary. In a July 6 letter addressed to U.S. Secretary of Energy Spencer Abraham (original forwarded to AF/W for transmittal to DOE), President Obasanjo provided the most comprehensive and clear explanation for the reasons behind the decision to award Marubeni/Hitachi the contract to rehabilitate the Delta II and III Power Plants. The office of the President asked the Embassy to forward the letter, which asserts that Marubeni/Hitachi's technical specifications and delivery time best fulfilled the project requirements desired by the GON. End Summary. 2. On July 6, President Olusegun Obasanjo presented the Embassy with a letter for Secretary of Energy Spencer Abraham regarding the rehabilitation of the Delta II and III Power Plant. The six-page letter details the reasons behind the GON decision to award the contract to Marubeni/Hitachi, rather than to General Electric Energy Services or Babcock Electric Projects. 3. The letter explains that Marubeni's proposal provided for the following: full replacement of the existing 5 GE turbines with 12 brand new Hitachi H-25 gas turbines; replacement of existing Hitachi generators and generator protection panels with new ones; a maintenance package including training and deployment of an on-site technical advisor for 12 months; replacement of the existing turbine control system with the GE Mark V speedtronic; and reinstallation of the Inlet Air System. The entire proposal was scheduled for completion in 24 months with a total cost of USD 123.75 million and included a deferred and staggered payment incentive. 4. The letter says that General Electric's proposal offered three options. At the low end, GE offered to maintain the current old technology by replacing parts with identical parts. At the high end, GE proposed upgrading the technology by installing new gas turbine components, advanced seals, and the load gear box for an overall improvement in performance of 16 percent of output and 5.5 percent on heat rate over the current base load capacity of the units. The proposal also included upgrading the control and protection system of each of the units, refurbishment of plant equipment, and an Operation and Maintenance (O&M) and Long Term Service (LTSA) agreement. The time-frame given for completion was 16 months for a total cost of USD 90 million. The letter asserts that GE estimated that total replacement of existing generators, as offered by Marubeni/Hitachi would take 24-36 months (a potentially longer timeframe than the 24 months proposed by GE). 5. Babcock Electrical Projects, the letter explained, proposed a solution that was considered technically inadequate to address the identified problems with the power plants. The Babcock proposal included rebuilding the units to a condition comparable with that of a major overhaul and did not include long term maintenance. The letter also mentioned that NEPA could not establish any record of Babcock's previous performance on a similar project. 6. The letter also questions GE's ability to execute the contract on time. In the letter, President Obasanjo notes that Delrohm/General Electric failed to execute on time the 1998 contract to rehabilitate six gas turbine units in Delta IV. The letter mentions that the NEPA Technical Board also had expressed concerns over the reported lack of commitment on the part of the Delrohm/GE experts deployed on the project. Therefore, the letter infers that the decision to award the Delta II and III rehabilitation contract to Marubeni/Hitachi was based on that company's technical specifications and timeline as well as on the GON's past experience with General Electric in Nigeria. 7. The letter briefly explains why the GON decided to revise the Egbin Power Plant contract in favor of Marubeni/Hitachi and against NAIRDA. According to the letter, the original award lacked credibility and transparency. In addition, NEPA had identified NAIRDA as an air-conditioner retailer and maintenance company and, therefore, lacked experience in this area. The letter states that there was no evidence of any affiliation between this company and General Electric and that GE was not party to the tender and was to participate only as a sub-contractor to NAIRDA, if NAIRDA so chose. 8. President Obasanjo closed the letter by writing "The Government of Nigeria appreciates the concerns of the American business community in ensuring the maintenance of transparency in our bidding and tender process in order to encourage investments by American companies in Nigeria. In this regard, I assure you that my administration will continue to welcome to our country all genuine investors willing to do business with us in accordance with the level of business practices accepted internationally." 9. Comment. President Obasanjo's letter, in response to Secretary Abraham's March 2001 advocacy letter sent on behalf SIPDIS of GE, is the only written response we have received on any recent advocacy case and the most complete and comprehensive explanation we have received regarding this particular case. GE has claimed that, as the lowest bidder, it was more deserving of the contract and was convinced that the project award was influenced by the Japanese Prime Minister's visit to Nigeria, in addition to a visit by the CEO of Marubeni. Although President Obasanjo's letter admits that GE was the lowest bidder, it concludes that Marubeni was awarded the contract because it offered the best technical specifications and the fastest delivery time. Post will pouch copy of letter to Secretary Abraham. End Comment. Jeter
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