…negotiations on with the contractor

After the Kholongchhu hydropower project, the Construction Development Corporation Ltd. (CDCL) is now planning to work on a portion of tunneling works for the Nikachhu project.

However, by the time the CDCL’s hydropower services department was formed, the tender for the Nikachhu had already been awarded. Currently, the CDCL is in advanced stage of negotiation with the contractor to sublet about 3KM of adit for the headrace tunnel. Adit tunnel is a passage to the main tunnel. A decision would be reached next month.

As for the Kholongchhu, a provision has been made in the tender directly nominating CDCL for a portion of adit. The winning bidder for Kholongchhu tunnel works will have to sublet an adit to CDCL.

The works for Kholongchhu alone is going the cost CDCL Nu 1.2 billion. Druk Holding and Investments (DHI), the parent company will be injecting an equity of Nu 374.6 million (30 percent) for the purchase of equipment and machineries. DHI has already released Nu 204.26M. The company plans to raise the remaining 70 percent of the cost, which mainly includes the operation cost, from domestic borrowings.

CDCL’s director for hydropower services department, Karma Gayley said all major equipment, which would possibly take longer time for delivery has been procured. In another four to five months, he said the remaining equipment would also be ready for use at the site. “We are prepared,” he said.

Should the CDCL secure the works for Nikachhu, it would cost the company an additional Nu 300M. Will the company make any profit? “Not a chance,” said the director. He explained that the company breaks even if they are awarded 6km of tunnel at the same site. “But we are taking the works to build our capacity in terms of hydropower construction,” he said. He cited huge investments and capital requirement as some of the challenges.

“But we are confident that we can take up any tunneling works with locally available expertise,” he said. Save for a geologist, all employees in the department are Bhutanese with experience in hydropower construction. As of now, the department has 40 employees and when works for Kholongchhu begin, it will have 150 more working in the tunnel.

CDCL has more in store. It is looking at the possibility of Engineering, Procurement and Construction (EPC) contract, where it could partner with renowned contractors in a medium sized hydropower project.

Karma Gayley said this opportunity, if given, would give a big boost to CDCL not only in tunneling works but also for dam and powerhouse construction.  While there is a huge financial risk, he said the CDCL should use its competency in terms of design. If the EPC materialises, he said the company would gain parallel experience in all hydropower components. EPC is a particular form of contracting arrangement where the contractor is made responsible for all activities from design, procurement, construction, to commissioning and handover of the project to the owner.

For example the electromechanical works for the Nikachhu was awarded to a German company Voith Hydro Private Limited on EPC. Under this mechanism, the contractors carry out the detailed engineering design, procure equipment and materials, construct and deliver a functioning facility or asset to Druk Green. Given the nature of contract, least cost escalation is expected because the geological risks would be taken care by the contractors.

CDCL was also awarded Nu 88M worth of works to construct drift tunnels for the preparation of detailed project report (DPR) of the Nyera Amari project, initiated by the Druk Green.

It has successfully completed the drift tunnel, which is an exploratory tunnel for DPR preparation at Thrimshing. The works for the drift tunnel in Gomdar and Martshala are on going.

Tshering Dorji