Category Archives: Energy

Contrary To Expectations, Bolivia Selects A Chinese Firm To Build Its First Industrial Lithium Carbonate Plant

Juan Carlos Zuleta writes in Seeking Alpha:

Summary

  • In a recent article I discussed in depth the contractual process for lithium industrialization in Bolivia.
  • I also argued that the one for construction of an industrial lithium carbonate plant was apparently not only delayed but had an anticipated winner.
  • I was then referring to the German consortium AFK – ACI Systems which has since been awarded by the Bolivian government to further develop the lithium downstream in the country.
  • While I had reasons to believe AFK – ACI Systems would also be chosen to build the lithium carbonate plant, Bolivia selected Maison Engineering Co. Ltd., a Chinese engineering firm.
  • Here I describe in detail the second bidding process raising some issues about transparency and doubts about the objective capability of the selected Chinese consortium to timely build the plant.
  • Looking for more? I update all of my investing ideas and strategies to members of Lithium Investing & Beyond. Get started today »

This article was first published on May 26, 2018, as a Marketplace piece for my subscribers only.

In a previous take on the two contractual arrangements Bolivia was pursuing in the recent past both for lithium industrialization and construction of its first industrial plant of lithium carbonate, I discussed in depth the first, concluding on the second that its final results “are long overdue even though it wouldn’t seem so hard to imagine the name of the company that may soon be declared its winner.”

I was back then referring to the German consortium AFK – ACI Systems which has since at the end awarded by the Bolivian government to further develop the lithium downstream in the country. While I had reasons to believe the German consortium would also be chosen to construct Bolivia’s first industrial lithium carbonate plant, the Bolivian government selected Maison Engineering Co. Ltd., a Chinese engineering firm.

In this brief note, I describe in detail the second contractual process which has been divided into two stages. One, in which companies were asked to send expressions of interest to participate in the bidding process, and another one, in which pre-qualified firms in the first stage of the process were invited to submit their technical and economic proposals.

Seventeen companies (most of them joined in consortia) submitted their expressions of interest, out of which only ten pre-qualified to the second stage of the process. Only four consortia submitted their technical and economic proposals for final evaluation and, strangely enough, one firm (Chalieco – China) submitted an official withdrawal from the contractual process.

In the table below, I present the most relevant information on the two stages of the contractual process about which the following considerations are in order:

Sources: Technical Report GNRE-DPL- 018/2017, June 8, 2017 (no longer available on the web), Fides (1), and Fides (2)

First, it is observed that the selected consortium (Maison Engineering Co. Ltd.) was not among the first three pre-qualified ones in the first stage of the process. As a matter of fact, its percentage points (83) were just above the average for the 10 pre-qualified consortia.

Second, none of the three pre-qualified consortia with the highest scores in the expressions of interest stage of the process submitted its technical and economic proposals. And as it was already mentioned, one of them (Chalieco, the firm with the highest score in the first stage of the process) submitted an official withdrawal from it.

Third, somewhat curiously, Maison Engineering Co. Ltd. and AFK – ACI Systems show the same score in Expressions of Interest (83 percentage points) and the amount of their economic proposals is also strikingly similar (Maison’s economic proposal is only about US$ 64,275 costlier than AFK – ACI Systems’).

What happened?

It all seems to indicate that both the Memorandum of Understanding that YLB signed with the German consortium AFK ACI Group for the industrialization of lithium as well as the Konrad Adenauer Stiftung Foundation (KAS) document in which it was ascertained that the German group occupied a privileged place in the bidding process (I referred to in a previous article), together with president Morales’ affirmation one day before the deadline for the formal submission of said proposals by the companies participating in the competition that the German option was the most advanced and advantageous option for Bolivia simply discouraged the proponents with the highest scores in the first stage of the contractual process (Petroquim, Hyundai and Chalieco) from submitting their technical and economic proposals. In this regard, it might be quite symptomatic that Chalieco decided to present a formal withdrawal from the contractual process.

It can also be conjectured that, after an almost three-month delay, Bolivian Lithium Deposits (Yacimientos de Litio Bolivianos – YLB, in Spanish) selected Maison Engineering Co. Ltd. and not AFK – ACI Systems – despite no material difference was found between these companies, either in terms of the four criteria (General Experience, Specific Experience, Economic Solvency and Key Personnel) utilized to evaluate the expressions of interest or their economic proposals – in order to give the impression that everything was done in the most transparent manner.

In this context, doubts persist as to whether the Chinese firm will meet the 14-month deadline indicated by YLB to build the first industrial lithium carbonate plant in Bolivia considering that, according to its webpage, they have no concrete experience in building any such plants. True they claim they are able to source a variety of China-based technologies including chemical product plants. But this is a bit too broad a category to be certain about its objective capability to accomplish this task in a timely fashion.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

https://seekingalpha.com/article/4216428-contrary-expectations-bolivia-selects-chinese-firm-build-first-industrial-lithium-carbonate?page=3