Audit confirms problems with electricity project

In April 2011, the Australian auditor Deloitte Touche Tomatsu presented a report on EDTL to the Prime Minister, who delivered it to Parliament on 27 May. Deloitte did not perform a financial audit, but reviewed a number of administrative and technical aspects of the current and future electricity supply in Timor-Leste and made about 50 recommendations.

Electricity will absorb 39% of Timor-Leste’s 2011 State Budget, and the Deloitte report increases transparency about this often-hidden sector. Although Deloitte states that its report is for the internal use of Government and Parliament, it contains essential information for Timor-Leste’s citizens, so La'o Hamutuk has scanned and translated it from Portuguese to English and posted it on our web site: scanned Portuguese original (6MB), Portuguese text (1MB), English text (1 MB) and English Executive Summary and Recommendations (0.1 MB)

The report covers EDTL’s activities from 2009 through September 2010, and discusses the agency’s administrative, financial, procurement, fuel, governance and maintenance problems, as well as how it interacts with the Ministry of Infrastructure, Pakote Referendum contractors and management contractor Manitoba Hydro.

Deloitte also reveals quite a bit about the heavy oil power plants and national electricity grid currently being built by Puri Akraya Engineering, Wartsila and Chinese Nuclear Industry No 22.
Among the key points related to the national project (parenthesized numbers are sections in the report):

• EDTL will need more than the one year of training allocated before it can maintain and operate the new national grid. (3.4.4)
• Plans have not been made to connect new grid and substations with existing distribution systems. (3.4.5)
• The new Dili substation won’t have enough circuit breakers. (3.4.5)
• Comoro generating station is being expanded, although it will be closed soon. (3.4.6)
• The new substations won’t have enough reserve transformer capacity. (3.4.7)
• The 2008 contract with CNI22 hasn’t been revised to reflect the current situation. It is inconsistent with the 2010 contract with Puri Akraya Engineering. (4.2.1.1)
• The contract awarded to the newly-created entity Puri Akraya Engineering last year was tendered with “significant difficulties” and no multi-supplier consultation. (4.2.1.2)
• The government doesn’t have enough qualified engineers to oversee the project. (4.2.2)
• The directors of Puri Akraya Engineering (PAE) are Indonesians Eng Ho Tan, Dany Subrata, Raul Puri and Chander Vinod Laroya. (Annex I)
• The first two shareholders in PAE, in July and August 2010, were Full Blossom Ltd (Hong Kong) and Pearl Energy Worldwide Ltd (British Virgin Islands). (Annex I)
• 69% of PAE shares are held by Dooks Group Holdings Ltd of the British Virgin Islands, with the balance equally divided between PT Puri Energi Kenchana and Akraya International PT, both of Jakarta Selatan. The total value of shares issued is $7.8 million. (Annex I)
• CNI22 has subcontracted to Sichuan Electric Power Design Institute, Central Southern China Hubei Electric Power Engineering Consultation & Supervising Co. Ltd, Xi’an Marine Equipment Engineering Research Academy, Xi’an Tianhong Electric Appliance Co. Ltd. and Ningbo Huyong Electric Power Material Co. Ltd. (Annex J)
• PAE has subcontracted to Wartsila Finland Oy, PT Wartsila Indonesia, PT Wijaya Karya insan Pertiwi, PT Rekayasa Industri, PT ABB Sakti Indonesia, PT Samapta Nusantara, and IOT Infrastructure & Energy Services Ltd. (Annex J)

If EDTL adopts Deloitte’s recommendations about management, maintenance and day-to-day operations, today’s electricity supply in Dili and other district capitals may improve. However, we continue to wonder if administrative and technical fixes can repair the fundamental mistakes with the expensive, polluting, ill-conceived, poorly-designed, sloppily-constructed, obsolete-technology, very late, heavy oil-fueled power plants and centralized national grid.