Nandipur Project: Govt Wishes to Add another 44 Percent to the Cost plus Controversy to the Project

Written by  Published by:Pakistan Views Monday, 12 October 2015 09:35

ISLAMABAD: Amid controversies and ongoing investigations, the government has sought an increase of more than 44 per cent in the previously-approved cost of the beleaguered Nandipur Power Plant.

The National Electric Power Regulatory Authority (Nepra) had approved an overall cost of Rs45 billion for the power plant on April 15 this year.

Last week, the Northern Power Generation Company Limited (NPGCL) — a subsidiary of the power ministry that operates the much-touted plant — in its regulatory filings asked for the price to be increased to Rs65.35 billion ($693.6 million). Nepra has yet to give its determination on the request.

The NPGCL has warned that “the project will not sustain and shall collapse as it is already at the verge of bankruptcy and is unable to recover costs incurred” if a fresh cost revision was not allowed because of the tight estimates of the previously approved costs.

“With the costs and tariff determined by the learned authority, the project will not be able to even pay lenders’ payments and the project will collapse within days like other Gencos,” the revised petition said.

Stating that in view of the realities of the project, all the interest during construction (IDC) incurred should be allowed as it would be more beneficial for end-consumers who will get regular electricity.

The project has seen its share of controversy since it closed down five days after it was inaugurated by Prime Minister Nawaz Sharif on May 31 this year after producing electricity at the record cost of Rs42 per KWH.

Referring to the report of a judicial commission headed by former Supreme Court judge Rehmat Hussain Jafferi, Nepra said in April this year that, “the Ministry of Law, Justice and Parliamentary Affairs is responsible for causing a delay in completion of the documents. The negligence on the part of executive authorities... [has caused] an approximate loss of more than Rs113bn to the National Exchequer until April 2012.”

The original cost of the project was estimated at Rs23 billion, before it was delayed for four years under the PPP government.

Sources said that Justice Jafferi was, once again, asked by the government last week to investigate the latest controversy over the project after Justice Nasir Aslam Zahid declined to do so, citing personal engagements.

Project authorities asserted that the actual project cost was in fact Rs58.8 billion, as allowed in PC-1 in April this year, when Nepra cut down certain cost elements to put the total cost at Rs45 billion.

Water and Power Minister Khawaja Mohammad Asif told the Senate a few days ago that Rs49 billion had been spent on the project as of July this year, against the Rs58 billion approved in the PC-I. He said that over Rs9 billion was available for running the project on gas.

The petition noted that engineering, procurement and construction (EPC) costs were previously calculated at $317.7 million, but Nepra did not approve $11.2 million of this.

The NPGCL had demanded a separate $65 million cost escalation, which was also disallowed by Nepra. However, the amount, which was in fact 65 million pounds sterling, had to be paid to the EPC contractor due to an amended agreement, taking total EPC costs to $382.5 million.

The NPGCL justified its cost claim of $382.5 million for the 425MW plant on the basis of $370 million allowed to 386MW Uch-II power plant by Nepra, despite the fact that both have the “same GE turbines”.

Also, it said the actual non-EPC cost was $46 million, but Nepra had allowed only $19 million of that, while spare parts’ cost was allowed at $11 million against the demanded $15 million.

But the major cost increases now demanded by the petitioner included Rs3.97 billion, incurred on the gas connection and Rs2.575 billion for the plant’s conversion to natural gas, that would add 100MW to the project’s installed capacity of 425MW.

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