To run efficiently, govt will outsource Nandipur power plant

Prime minister to inaugurate 525MW combined-cycle plant today.

GUJRANWALA: The government has decided to outsource operations of 525-megawatt combined-cycle Nandipur power project in an attempt to run it efficiently and at higher capacity.

Speaking to the media here on Friday at the site of Nandipur plant, which will be inaugurated by Prime Minister Nawaz Sharif on Saturday, Nandipur Power Company Limited Managing Director Muhammad Mehmood said operations and maintenance of the plant would be outsourced to a private investor.

“State-run plants are running at low capacity (in the range of 18% to 25%) because of negligence and inefficiency and I have seen such plants being run by private parties at 44% of capacity,” he said.



Responding to a question, Mehmood said they were engaged in negotiations with the Central Power Purchasing Agency (CPPA) for the purchase of electricity. “We will make sure that CPPA is bound to buy electricity on cash payment in order to avoid circular debt.”

He revealed that the country faced a total loss of $1.64 billion in the wake of delay in the Nandipur project by the previous government. The present government was forced to pay $80 million in markup to banks on detained plant equipment at the Karachi port, $7 million in demurrages, $50 million for replacing the defective parts and $19 million as escalation cost.

“We suffered a loss of $1.48 billion on account of power outages following delay in completion of work on the Nandipur plant,” he said, adding the cost of the project had gone up to Rs59 billion against initial estimate of Rs23 billion. The project was planned to be completed in 2011.

According to Mehmood, the Chinese contractor had pulled out of the project and the loan offer expired in the absence of sovereign guarantees. However, the PML-N government persuaded the contractor to resume work and re-negotiated loan deals with banks at concessionary rates.

“In the previous government, loan agreements were signed with banks at Kibor plus 2% whereas we have brought it down to Kibor plus 1.5%, saving Rs422 million in interest payment,” he said.

“We completed the plant’s first turbine on May 21 that will generate 100MW against the scheduled time of December and the entire project will start functioning at the end of this year.”

Mehmood boasted that the government issued sovereign guarantees in just two and a half hours against loans acquired from commercial banks. The borrowed amount will be repaid in 13 years.

The plant will generate 425MW if powered by furnace oil and production will go up to 525MW if run on gas. The project will be switched to liquefied natural gas (LNG) in June next year.

An LNG terminal is being set up and Sui Northern Gas Pipelines Limited (SNGPL) will supply 100 million cubic feet of LNG per day to the plant.

“We will lay a dedicated pipeline from Lahore to the site of the plant,” Mehmood said, adding SNGPL, on its part, would build infrastructure for transporting LNG from Karachi to Lahore.

The tariff for power produced by the plant was estimated at Rs22 to Rs23 per unit, which will come down to Rs17 per unit after LNG is consumed as fuel.

Mehmood said the government had achieved financial close for Rs37.65 billion in just 55 days.

Published in The Express Tribune, May 31^st, 2014.

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