The ECC has also waived demurrage and detention charges totalling Rs856.5 million on the machinery, imported for the project and stuck at the Karachi Port. DESIGN: FAIZAN DAWOOD
The government has decided to borrow Rs23 billion from domestic banks to finance the construction of the 425-megawatt Nandipur power project – a step taken after a consortium of foreign banks led by the Chinese backed out of its financing commitment.
According to a senior government official, the government will take Rs23 billion in loans from banks against sovereign guarantees compared to the total financing requirement of Rs57 billion.
In March 2009, the consortium, comprising BNP Paribas and Export-Import Bank of China, had signed a Buyer Credit Facility Agreement worth $150.151 million with Northern Power Generation Company Limited for the combined cycle power project at Nandipur, near Gujranwala.
“The Ministry of Water and Power will seek the approval of the Economic Coordination Committee (ECC) in its upcoming meeting for issuing government guarantees to the banks,” the official said.
Arrangements have also been finalised with the Chinese contractor to push ahead with the project. The main engineering, procurement and construction (EPC) contractor is a leading Chinese company, Dongfang Electric Corporation, with a sub-contractor GE France.
The ECC, in a meeting held in the first week of July 2012, had already approved an increase in sovereign guarantees from Rs5.3 billion to Rs19.1 billion in favour of local banks as a stopgap arrangement until foreign loans came.
The ECC has also waived demurrage and detention charges totalling Rs856.5 million on the machinery, imported for the project and stuck at the Karachi Port.
Earlier, the Chinese contractor had served a notice on the government, asking it to scrap the contract for the project because of delay in work. During negotiations, the Chinese company sought compensation for the losses it suffered during the two years when the machinery remained stuck at the port.
The machinery worth $85 million has been awaiting clearance for quite a long time. “Now, the issue with the Chinese contractor has been settled and it has agreed to carry out physical work if funds are released,” an official said.
The Supreme Court had also taken notice of the delay in executing the Nandipur project. A judicial commission, constituted by the Supreme Court, held the law ministry responsible for deferring work for long.
The Ministry of Water and Power had sought legal opinion on foreign guarantees from the Ministry of Law in the contract with the Chinese firm, but the summary remained pending with the law ministry for two years from March 2010 to March 2012. According to the original plan, the project had to be completed in April 2011.
Published in The Express Tribune, February 13th, 2013.
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COMMENTS (13)
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Well Baboo mafia is in full swing,they were not given their share of pie or the people against the project had greased their palm heavily so they delayed the matter.These Baboos have become a nuisance for our beloved country.I think the next govt should think of snatching all power of decision from them.
The increased cost must be recovered from the responsible in the Law Ministry. Strange GOP cannot arrange Rs. 23 billion whereas they promised Rs. 22 billion to ML(Q) in the name of development fund!
why wouldnt they have PKR 23bn to spare? @John the Baptist:
@polpot: I think another assignment for the CJ! The Supreme Court had earlier formed a commission to probe the reasons for delay in this project. The commission in its report held Ministry of Law responsible for this mess. The case is now being taken up by the Supreme Court bench headed by CJ.
Disastrous fiscal policy. If the government borrows such huge amount of liquidity from the local banks, then there is nothing left for private sector borrowing, and it also shows poor credit of PAK and lack of trust by the local banks towards people. The GDP will shrink, economy will go in recession, and government will either print money or sell of assets at cheaper rates-slippery slope.
You grow the Economy by attracting investments from outside; not by lighting fire to keep warm with the wood that supports the house.
Banks should not finance such project as this Government is not trustworthy. NPLs of local banks are increasing day by day and taking such exposure will definitely led to Loss. SBP should take notice and donot allow banks to finance till the final decision come by supreme court.
@John the Baptist: It is just paper, only thing needed is a printer. The circle of fiat life.
" losses it suffered during the two years when the machinery remained stuck at the port." +++++++++++++++++++++++++++++++++ why was the machinery stuck at the port for 2 years? Isnt that amazing in a country starved for power? Who will pay the interest on the capital let aside demur rage? what will be cost of power generated? Is the project still viable?I think another assignment for the CJ!
LOL...what a joke !
To the ET Editors +++++++++++++ Can you pls present an article covering all the Power Projects in Pakistan and their current status? ++++++++++++++++++++++++++++++++++++++++++++ Fragmented coverage needs to be replaced with an overall view!
@John the Baptist: Local banks had already disbursed around PKR 14 billion against a soverign gurantee of PKR 5.3 billion before the project was brought to a standstill by Ministry of Law on flimsy grounds. The ECC approved increase in sovereign guarantees from PKR 5.3 billion to PKR 19.1 billion in favour of local banks as a stopgap arrangement until foreign loans came. The sovereign gurantees are now required to be enhanced to PKR 23 billion. However, the statement in this report that the government will take Rs23 billion in loans from banks against sovereign guarantees compared to the total financing requirement of Rs57 billion is not correct. The fact of the matter is that total financing requirement is PKR 23 billion and not PKR 57 billion.
To ET: Mandatory Coverage of Power Projects +++++++++++++++++++++++++++++++ Pls include the targets for commencements for power generation of the project under coverage. You know very well how these targets slip.......
Local banks have Rs. 23 billion to spare? What joke! Only ET can publish such ridiculous propaganda!