Mon, Feb 16, 2004 page10

• Many questions remain about Tuntex's dealings

  TANTAN POWER PLANT Political connections were apparently behind a Tuntex subsidiary winning initial approval to build an industrial area and port in Taoyuan

  • By Chen Chung-hsing / STAFF REPORTER
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  The Council for Economic Plan-ning and Development said last week that political donations from former Tuntex Group (東帝士集團) chairman Chen Yu-hao (陳由豪) to the nation's three major political parties were designed to sway

  decision-making over a power plant contract.

  The government's accusation -- which followed the fugitive tycoon's announcement that President Chen Shui-bian (陳水扁) and his administration received political donations from him -- came as the Taiwan Financial Asset Service Corp (TFASC, 台灣金服) planned to sell part of Tuntex Group's collateralized equities in an auction scheduled for today.

  While Tuntex's bid for the contract to supply liquid natural gas (LNG) to the Taiwan Power Co's (Taipower, 台電) 4,000-megawatt thermal power plant in Tatan, Taoyuan was finally defeated last year, observers said the firm had had tacit approval from the former Chinese Nationalist Party (KMT) government. Foreign companies accused Tuntex of cheating because it had gotten such an early start that other bidders had a hard time catching up.

  Tung Ting Gas Corp (東鼎液化瓦斯興業), a Tuntex subsidiary whose shareholders include Japan's Mitsubishi Heavy Industries Ltd and China Development Industrial Bank (中華開發銀行), originally plan-ned to build the first natural-gas receiving terminal in northern Taiwan and to obtain the rights to sell natural gas.

  The contracts for importing LNG run for 25 years and the annual purchase volume exceeds 1.36 million tonnes.

  Several international petroleum suppliers, including the US oil giant ExxonMobil Corp, TotalFinaElf of France, British Petroleum Plc and Royal Dutch/Shell Group had expressed interest in vying for the lucrative LNG contracts for the Tatan plant.

  Observers noted that before a natural-gas receiving terminal can be constructed, a port must be built. This involves national land planning and the development of industrial parks, and must be approved by various government agencies, something that is difficult even if you have a lot of money.

  But the most difficult part was winning a contract from Taipower to supply LNG to the Tatan plant, in order to obtain fundamental distribution channels for imported natural gas.

  Criticism of Tung Ting's past "black gold" activities surrounded the construction of the port, the planning of the industrial area and even the gas-supply tender for the Tatan plant.

  Through his close relationships with the leaders of the KMT government, Chen Yu-hao recruited Lee Tuan-yu (李端玉) -- then director of the Cabinet's Fifth Department, which is responsible for industrial affairs -- to serve as Tung Ting's chairman, with responsibility also for Tung Mung Development Co (東盟開發) and Chien Tai Cement Co (建台水泥), in which Tung Ting had invested.

  The state-run Chinese Petroleum Corp (CPC, 中國石油) once expressed an interest in building a receiving terminal in the north of the country. But its ambitions were blocked in 1998 when the Ministry of Economic Affairs decided that the bulk of investments for a LNG receiving terminal should come from the private sector.

  Tung Ting then seemed to hold a near-monopoly on the project over both domestic and international competitors. It was accused of being involved in exclusive business deals and that was the focus of the Cabinet's doubts on Feb. 12.

  The government's handling of the Tung Ting investment project came in for criticism because even though a tender has not been issued for the gas supply contract for Taipower's Tatan plant, major resources had already been allocated to Tung Ting.

  Even before it was confirmed that Tung Ting had won the tender, however, the economics ministry had approved the company's

  application to have land designated for an industrial area and port. Tung Ting had thus obtained a location for the port -- Kuantang in Taoyuan -- on the coast right next to the site for the Tatan plant. Both the land and the rights to develop it had been given unconditionally to Tung Ting.

  Financial officials who participated in the approval of the Tung Ting investment project but asked not to be named said the reason the Kuantang port was approved was that Tung Ting met the requirements of national natural gas policy. The officials said the Tatan plant tender hadn't even been issued, so how could Tung Ting meet policy requirements before receiving the tender documents? In addition, the original reason for approving the construction of the port doesn't exist anymore.

  The officials said that this was all the result of official pressure at the time of the approval.

  Having been attacked for enjoying "protection from above," Tung Ting filed an application with the Industrial Development Bureau in 1995 to build a port.

  But not until 1999 did the bureau designate Kuantang as an industrial park. In July 2000, shortly after Chen Shui-bian took office, a CEPD committee meeting approved the proposal to build an industrial port in the Kuantang industrial park. Construction work commenced in May 2002.

  Because of the government's "protection," the tender for Tai-power's Tatan LNG power plant aroused concern in various countries. ExxonMobil, TotalFinaElf, British Petroleum and Shell have all gone through their respective countries' representatives in Taipei to lodge complaints with the Cabinet and the Presidential Office over the handling of the tender.

  China Petroleum was eventually allowed to participate in the bidding. Chen Shui-bian's administration also ordered a review of the qualifications of the bidders in the Tatan project.

  Last year, Tung Ting's bid for the 25-year, NT$395 billion (US$11.9 billion) contract to supply gas to Taipower was defeated and construction on the project was halted.

  Translated by Jackie Lin, Eddy Chang and Perry Svensson
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