Low priority: Govt puts Gadani power project on the back burner

Published: February 4, 2015
Email
China objected to the high cost of the project and also disagreed with the
technical design. PHOTO: AFP

China objected to the high cost of the project and also disagreed with the technical design. PHOTO: AFP

ISLAMABAD: 

In a first blow to the ambitious plan of attracting $45.6 billion Chinese investment in return for giving Beijing access to the Gwadar Port, the government has put the Gadani Power Park having an estimated value of $14 billion on the back burner.

Due to financial and technical objections raised by China, the government has reduced the scope of the project with a generation capacity of 6,600 megawatts from the planned 10 power plants to four, along with placing the entire project on the low priority list, said Gadani Power Park Deputy Chief Executive Officer Zafar Nasrullah.

Nasrullah was called on Tuesday by the National Assembly Standing Committee on Planning and Development to seek an update on the government’s flagship project that was sold by Prime Minister Nawaz Sharif as a solution to the lingering energy crisis.

The Gadani Power Park was one of the first few mega projects approved by Sharif to address the energy crisis in the medium to long term. Sharif had announced that 10 coal-fired power plants, each having a generation capacity of 660MW, would be set up at Gadani, and promised that they would be completed within five years.

The project is also part of the $45.6 billion investment that China has promised to make in Pakistan in return for access to the Gwadar Port under the China-Pakistan Economic Corridor.

According to the documents of the Ministry of Planning, the total cost of the original project was $13.8 billion. It estimated that 10 power plants would cost $9 billion, each worth $900 million. In addition to this, up to $4.43 billion would be required to lay transmission lines to evacuate electricity and another $1 billion would be needed for jetty and marine-related infrastructure.

Nasrullah said China objected to the high cost of the project and also disagreed with the technical design, he added. The deputy chief said that after the Chinese objections, the government has reduced the number of projects to four, which will also minimise the financial requirement for the transmission lines and jetty infrastructure.

Nasrullah said the Gadani power plants had been placed among seven projects, which will be completed after 2018. He said the government has already spent Rs180 million on conducting various studies for the project.

The prime minister had announced the project with fanfare without preparations that was not feasible from day one, resulting in embarrassment for him, said Dr Nafisa Shah, a member of the standing committee, belonging to the Pakistan Peoples Party.

She said media reports suggested that the project has been shelved – an assertion that officials of the Ministry of Water and Power were not in a position to confirm or deny.

Neelum Jhelum project

Giving a briefing on another important power project, the chief executive officer of Neelum Jhelum hydropower project, General Retired Mohammad Zubair said that the completion of the project, with a generation capacity of 969MW, by the end of next year hinges on the availability of funds.

He said although about 70% of the work was completed, its financial closure could not be achieved so far. The project was facing Rs50 billion financing gap and an amount of Rs14 billion was immediately sought from Prime Minister Sharif to continue work on the plant, he added.

Zubair said out of $1.1 billion funds arranged from foreign lenders, still $581.7 million remained undisbursed, creating financing problems for the project. He said the management was looking for bridge financing from local banks. Zubair said each day delay in completion of the project would cost the national kitty $1.5 million.

Nandipur Power Project

While giving an update on the construction of Nandipur project, the Ministry of Water and Power officials said the deadline to make the 95MW first turbine of the project by January this year was missed due to various faults developed in the machinery. He said the 425MW project may be completed by May this year but it cannot be run on gas at least for two more years.

Published in The Express Tribune, February 4th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

Facebook Conversations

Reader Comments (19)

  • waar
    Feb 4, 2015 - 3:49AM

    Whatsoever these projects will be completed within few years as promised by pm …nawaz means development and business …he will do anything to bring back the investments …have faith on this guy…

    Recommend

  • AVMPolpot
    Feb 4, 2015 - 5:53AM

    Power Projects in Pakistan are High Priority only till……
    ++++++++++++++++++++++++++++++++++++++++
    the foundation stone is laid by some BigShot. Then they slide into low priority.
    The Daimer Bhasha Hydro project has been inaugurated many past Presidents/PMs…..!

    Recommend

  • AVMPolpot
    Feb 4, 2015 - 6:01AM

    ” the completion of the project, with a generation capacity of 969MW, by the end of next year hinges on the availability of funds.”
    +++++++++++++++++++++++++++++++++++++++++++++++++
    End of next year= end 2016!.
    I remember countless stories in ET that the PM had initiated a follow up team in the PM’s Office to ensure the start of power generation by end of 2015.
    Now I think the outlook is somewhere in 2017.
    Ya Allah Raham……from this gross incompetence.

    Recommend

  • AVMPolpot
    Feb 4, 2015 - 6:06AM

    ” Due to financial and technical objections raised by China, the government has reduced the scope of the project with a generation capacity of 6,600 megawatts from the planned 10 power plants to 4,”
    ++++++++++++++++++++++++++++++++++++++++++++
    Each Gadani project suffers from the same financial and technical shortcomings.
    Reducing the projects from 6 to 4 does not in any way address those.
    4 more ‘Nandipur’ in the making.

    Recommend

  • AVMPolpot
    Feb 4, 2015 - 6:17AM

    ” Of the 27 agreements and MoUs expected to be signed, 21 relate to generating 16,520mw power at an estimated cost of around $33 billion.”
    +++++++++++++++++++++++++++++++++++++++++++++++++
    “The important projects among these are the 1,320 mw Sino hydro Resource project, two 1,320 MW coal fired projects in Sahiwal, two 330 MW Engro Thar Coal Fire Project, 1,320 MW each Muzaffargarh Coal Prower, Rahimyar Khan, SSRL Thar coal projects and Thar Mine Mouth Oracle projects, 1000mw SSRL Thar Coal Block6, 2,640MW Gaddani Power Park Project, 300MW Gawadar Coal, 100MW Quaid-e-Azam Solar Park, 50MW Dawood Wind Farm, 100 MW UEP Wind Farm, 50MW Sachal Wind Farm, 50MW Sunnec wind farm, 870MW Suki Kinari Hydropower Station,and 720MW Karot Hydropower Station.” Source ET.
    Await similar announcements for these projects as that for Gadani…….
    Request ET to publish the planning and targetted power tariff for each of these ..
    Dont forget to ‘reward’ PMLN at the next elections.

    Recommend

  • AVMPolpot
    Feb 4, 2015 - 6:25AM

    ” Nasrullah said China objected to the high cost of the project and also disagreed with the technical design”
    ++++++++++++++++++++++++++++++++++++++++++++++++==
    Heads must roll at WAPDA.

    Recommend

  • AVMPolpot
    Feb 4, 2015 - 6:33AM

    ” Zubair said each day delay in completion of the project would cost the national kitty $1.5 million.”
    +++++++++++++++++++++++++++++++++
    Consdiering that fact that 70 % investment has already been made in Neelum Jhelum and that it is the cheapest source of Power among all the new projects, funds should be diverted to it even if at the cost of other projects.The target date of end 2016 must be realized.

    Recommend

  • AVMPolpot
    Feb 4, 2015 - 7:20AM

    Illuminating Facts about Nandipur Project
    ++++++++++++++++++++++++++++
    1. Project Launched: In January 2008, Target Cost Rs. 23 billion ($329 million)
    2. By mid-2010, much of the work at this power project was complete and it was expected be finished on schedule in April 2011.
    3. However, the project suffered delays as the summary, sent by the Ministry of Water and Power for legal opinion of the Ministry of Law & Justice, remained pending with the latter for two years from March 2010 to March 2012. As a result, machinery worth $85 million remained stuck at the Karachi Port for over two years.
    4. In September 2012, the Chinese contractor terminated the contract for the construction of the Nandipur power project, saying his company had suffered colossal losses and also demanded $40 million as compensation for losses suffered because of depreciation and damages .
    5. In June 2013, Pakistan renegotiated the project with the same Chinese Contractor and work on the Project resumed.
    6. The cost of project was reported to have risen from Rs. 23 billion ($329 million) to Rs. 57.38 billion ($574 million).Prime Minister Nawaz Sharif inaugurated the first turbine of the project on 31st of May, 2014.
    7. The cost of the generated power was Rs 36 per unit based on operation on diesel. Read ET: http://tribune.com.pk/story/786998/nandipur-power-project-md-justifies-rs36-per-unit-cost-of-generation/
    8. The cost effective source for the Project being Gas , for which the project would be ready in another 2 years, viz. 2017.Thus the project suffered a time over run of 5 Years and cost over run of more than 100%.
    9. No updated estimate available of Power Generated on Gas by 2017.

    Shouldn’t those responsible be put in front of the Military Court?

    Recommend

  • hellboy
    Feb 4, 2015 - 7:24AM

    For 6600 MW 45b$ required.,,,Then no one will invest..As far as I know a 6600 MW plant will cost maximum 24000cr. rupees in Indian currency.that is around 4b$.

    Recommend

  • Asif
    Feb 4, 2015 - 7:46AM

    Why start a project when you don’t have money for it!!

    Recommend

  • AVMPolpot
    Feb 4, 2015 - 7:51AM

    Illuminating Facts about Neelum Jhelum HydroProject.
    +++++++++++++++++++++++++++++++++
    I invite the enlightened readers to list facts pertaining to The cost and time over runs for this project. I would only include only the following extract demonstrating the callous indifference of the Govt. to the suffering of the citizens:
    Source:http://customstoday.com.pk/969mw-neelum-jhelum-dam-minister-optimistic-about-funds-to-ensure-timely-completion/ Report dt 10th Jan 2015.
    “Sher Ali, during his visit, agreed that continuous cash flow was pertinent for early completion of the project. He said that all-out efforts were being made to address certain financial challenges.
    It is to be noted that fiscal problems reportedly stemmed from the Economic Affairs Division inability to arrange $475 million (Rs47.5 billion) from local or international banks and financial institutions *for almost four years.”

    Considering the fact that Neelum Jhelum would generate power at the lowest tariff the delay is criminal!

    Recommend

  • raider
    Feb 4, 2015 - 9:32AM

    gadani power project, nandi pur power project, neelum jehlum poer project, all are in state of decline, now they are looking for rental power plants, suggesting that they have failed in this field al least, i can not help forget the very famous quote of mian sb, agr moka mila tu mulk ke taqdeer badal dan ga, we are ready our luck be changed, keep it up we will not let you to run any where even to gulf states, solve it or confess your failure and go home, time is worry, thanks

    Recommend

  • Hatim
    Feb 4, 2015 - 9:32AM

    The goal of the project was achieved. Millions were transfered to N ministers.

    Recommend

  • Paindoo
    Feb 4, 2015 - 10:52AM

    Seems like N government is on track for its “Roshan Pakistan” that was promised to masses before last general elections.

    Recommend

  • observer
    Feb 4, 2015 - 12:55PM

    Who needs these power projects when we’ve go the Islamic bomb.

    Recommend

  • sharabi
    Feb 4, 2015 - 1:23PM

    @hellboy
    No you are right in case of India because All the associated Vendors, Engineering Consultant, Different Contract companies (Including few MNCs) are Indian, Like Multitex for Water & Steam, BHEL for heavy Equipment etc.
    But in case of Pakistan that price is genuine, I think Pakistan government is transparent in this project the real reason of such cost is the lake of Engineering Companies, Resource availability.
    There are 27 Large level Power-plant suppliers in India but none in Pakistan. But its not the fault of Nawaj Governmet.

    Recommend

  • Hari Om
    Feb 4, 2015 - 2:34PM

    So Pakistan is finding out Higher than Himalaya’s, Deeper than Indian Ocean, Sweeter than honey, Iron Brother P.R. China is as tight fisted a capitalist as capitalists come. Seems the bang in the background is the crashing to earth of the grandiose Pakistani delusions about the China-Pakistan Economic Corridor created by Bad Weather generated by “All Weather Friend” P.R. China.

    Recommend

  • raider
    Feb 4, 2015 - 2:58PM

    @sharabi:
    present arguments that Govt is transparent in this this subject, adhering to rhetoric that Govt is transparent should be considered naivety, why do their own businesses never fail due to lack of resources and technology, why do they make promises and spew out claims that they will put an end to load shedding conundrum

    Recommend

  • syed baqar ahsan
    Apr 16, 2015 - 8:47PM

    We will remain confused and immature for sure,always looking into other pocket,now IPPs and RPPs is a loot with our politicians and own business.Draining public money smartly and being shared by both.Recommend

More in Business