Nandipur power project: MD justifies Rs36 per unit cost of generation

Says PM Nawaz Sharif ordered a special audit to avoid further cost escalation

ISLAMABAD:

The 95-megawatt (MW) first turbine of the Nandipur power plant, which was inaugurated by Prime Minister Nawaz Sharif five months ago, produced electricity at Rs36 per unit and is currently shut down, admitted the managing director of the project on Thursday.

In a testimony to the National Assembly Standing Committee on Planning and Development, Mohammad Mehmood, the MD of the 425MW power plant, defended the decision of producing electricity at Rs36 per unit.

He went on to claim that the Rs36 per unit cost was affordable when compared with the loss of economic opportunities due to less availability of electricity. He said the management has requested the National Electric Power Regulatory Authority (Nepra) to give it Rs36 per unit cost of production on diesel.

The high cost of generation disturbs the overall cost of the fuel mix, putting additional burden on the end consumers.



In May this year, PM Sharif inaugurated the first 95MW turbine out of four turbines and announced that the project will be fully commissioned by end of the year. However, Mehmood said that the plant was operated only when there was a high demand and at the moment, it has been completely shut down. He said that there was no need for additional electricity and shutting the plant down was also required for some civil work.

Approved in 2007 – at a cost of Rs23 billion – the Nandipur power project was delayed for three years due to Ministry of Law and Justice’s refusal to clear sovereign guarantees for the project. In 2013, the project’s cost was revised upward to Rs58 billion.

Mehmood said the Rs23 billion was not a realistic cost and even without delay, the project would have been completed at Rs43.5 billion. Out of Rs58 billion, an amount of Rs37 billion has been borrowed from banks at an interest rate of around 12%.

Mehmood said the project cost has not been further increased to Rs84 billion and Prime Minister has already ordered a special audit of the project to make sure it is completed within Rs58 billion.

The managing director said that an inquiry commission ordered by the Supreme Court held the Ministry of Law responsible for the delay in execution of the project.

Mehmood claimed that due to this delay, the country sustained losses of Rs315 billion, including Rs298 billion on the account of lost economic opportunities due to load shedding.

“It is a political presentation and an attempt to cover-up the things,” said Dr Nafisa Shah of the PPP. She said if the government wanted to calculate economic cost of load shedding due to delay in completion of Nandipur power project, then economic cost should also be worked out of all power plants not working at optimal level including ones that are shut because the government is not providing fuel.

The delay caused a Rs8.5-billion increase in mark up and expenses of Rs5 billion were incurred on inspection and testing of the equipment that was rusting at the Karachi port for three years, said the project MD.

“The project will be fully commissioned by January next year and the cost of power generation on furnace oil will be Rs18 per unit,” said Mehmood.

Contrary to the Rs18 per unit tariff that has been sought by Nepra for the Nandipur power plant, the Independent Power Plants are producing electricity at Rs14 to Rs16 per unit by using the furnace oil. Mehmood admitted that Rs18 per unit cost of generation was high but blamed the delay for increase in per unit cost of generation.

Mehmood said the cost will be brought down to Rs14 per unit once the imported Liquefied Natural Gas is available.

Published in The Express Tribune, November 7^th, 2014.

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