Multi-million-dollar scam: Nepra detects fraud in rental plant payments

Electricity watchdog notes irregularities in advance payments to Naudero-II and Guddu projects.

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has dealt another blow to the controversial rental power projects (RPPs) by pinpointing violation of laws and irregularities running into millions of dollars in advance payments to Naudero-II and Guddu rental power projects.

Nepra declined to approve a fresh tariff for Naudero-II after discovering that the project’s equipment belonged to Guddu rental power project, which had been dismantled illegally. “Now when it has been established that the plant and machinery earlier approved for Guddu Project is being shifted and installed at Naudero … the Authority is of the considered opinion that tariff for the same machinery could not be given just for want of its relocation from one site to another,” the regulatory body wrote in its verdict.

Seeking fresh tariff for Naudero-II through a petition before Nepra, the Central Power Generation Co Ltd (CPGCL) said 14 per cent advance payment of US $11.28 million was made for the project in April 2010. “It has been observed that the 14 per cent advance payments of $10.15 million was also paid for the same machines for Guddu rental power plant having a capacity of 110 MW,” Nepra said.

“The authority considers that the payment of advance rental of 14 per cent for Naudero-II cannot be considered a prudent decision while CPGCL had already paid 14 per cent advance for the same machinery at Guddu,” it added.

Nepra proceedings do not say why Guddu was allowed to be dismantled and Naudero revamped when its tariff was already approved in October 2009. The proceedings are also silent on an “intervention request”, seeking details on the origin and present condition of the plant’s equipment.

Anwar Kamal advocate, who had filed an intervention request during the hearing, had sought details but his request was found to be time-barred.

The Supreme Court is also looking into allegations of huge kickbacks in awarding contracts for the RPPs. The apex court had also directed Nepra to provide the relevant record of the RPPs and fine those who had failed to meet the deadlines.

Nepra observed the CPGCL violated its mandate as it entered into an agreement with the Walters International Power Limited (WIPL) and sought a fresh tariff for Naudero -II after shifting of Guddu equipment. “It may be observed that CPGCL being a generation licensee of Nepra could only use the plants and machinery as allowed in its licence. Neither any addition of the plants/machinery nor deletion/de-commissioning of such plants and machinery can be made without the express/written permission of the authority,” the Nepra reminded CPGCL of its parameters.

CPGCL said: “Based on detailed negotiations, the WPI revised its proposal and submitted it to CPGCL/PEPCO.” Finally the proposal was forwarded to the Ministry of Water and Power, which, through its letter dated March 6, 2010, said: “Considering the acute shortage of energy in Pakistan and the federal government/ECC-directives including the ECC decision dated 27th January 2010 relating to Larkana Package Central Power Generation Company (Genco-11) is directed to immediately approach Nepra for tariff approval.”

The CPGCL reported to Nepra that Water and Power Minister Raja Pervez Ashraf had endorsed Guddu rental project’s signing off through arbitration and shifting of machinery to Naudero-II in a meeting held on September 6, 2010. The CPGCL also went one step ahead of WPI in getting a fresh tariff approved for the latter’s project, Naudero-II.

It stated that according to the manufacturer the useful life of the plant was 50 years and the remaining useful life was 25 years. To substantiate its claim, the CPGCL assured Nepra that it would provide certificate indicating useful life of the equipment.

Contrary to the claim, the representatives of Walter Power International disagreed and contended the “actual useful life of the plant is 30 years”. “Therefore the remaining useful life of the plant is four years,” they added.

During the proceedings, Nepra directed the CPGCL to substantiate its claim through provision of documentary evidence but it could not do so even after the lapse of several weeks.

Published in The Express Tribune, December 1^st, 2010.