Rental power projects: Concessions to non-compliers costing millions
Power firms neither met the cut-off date nor returned the advance payment.
ISLAMABAD:
The ministry of water and power has been time and again requesting for relaxation in terms and conditions for rental power projects (RPPs), which have neither met the cut-off date for power generation nor returned millions of dollars paid in advance from the national exchequer, reveals a study of documents exclusively available with The Express Tribune.
The Northern Power Generation Company Limited (NPGCL) had paid $42 million for two projects to Techno Engineering. An inspection of its first project, plant equipment of the Sahuwal Rental Power Project is missing despite the mother firm having received $23.1 million in advance.
The NPGCL was authorised to cancel the projects and retrieve the money with penalties under the Rental Service Contract (RSC), but documents show that it chose to grant further concessions to Techno Engineering.
The second project of the same firm which is located at the Samundari Road in Faisalabad could not sustain its operation after running for a brief period. NPGCL paid Techno Engineering $18.9 million as a 14 per cent advance for the project on April 1 last year.
The NPGCL also revised its RSC for the generation of 60 megawatts instead of 150MW from June 30, 2009. The NPGCL granted another month to the company for generating an additional 90MW of electricity.
An inspection of the plant carried out by Nepra revealed that “even the partially commissioned 60MW had not been (working) since August 11, 2010.” Besides, there was no progress on generation of the remaining 90MW of electricity.
According to Clause 4.4 (b) of the RSC, experts say, Techno Engineering should have been asked to pay $40,000 a day in penalties for the month-long delay, amounting to about $1.2 million.
When the NPGCL approached Nepra for a review of the financial charges and a waiver of the heat rate test for the two power projects, the authority declined the request on the ground that both projects were inoperative.
Nepra said that the sponsor had violated their contractual obligations by deviating from its commercial operation date (COD) even after receiving advance payment.
Nepra observed that there was no progress on ground despite the fact that a seven per cent advance was paid on June 4, 2008.
“After a lapse of one year, when the seller failed to fulfill its obligation, NPGCL instead of invoking penal clauses of the contract once again agreed to amend the contract on June 11, 2009 whereby it agreed to pay an additional seven per cent advance. To-date, there is no physical progress on the rental plant,” defeating the objective of the RPP.
Nepra officials suggested that under the circumstances it would not be in the consumers’ interest to continue with the Sahuwal project as it has lost its utility and there “is absolutely no justification for the relief being claimed by NPGCL in this regard”.
In another instance of violation of rules, the Central Power Generation Company, acting on the directives of the ministry of water and power, had paid $21 million in advance to Walters Power International Limited in violation of rules. The Supreme Court, after taking suo moto notice of the irregularity first reported in The Express Tribune, succeeded in retrieving the money.
Published in The Express Tribune, December 11th, 2010.
The ministry of water and power has been time and again requesting for relaxation in terms and conditions for rental power projects (RPPs), which have neither met the cut-off date for power generation nor returned millions of dollars paid in advance from the national exchequer, reveals a study of documents exclusively available with The Express Tribune.
The Northern Power Generation Company Limited (NPGCL) had paid $42 million for two projects to Techno Engineering. An inspection of its first project, plant equipment of the Sahuwal Rental Power Project is missing despite the mother firm having received $23.1 million in advance.
The NPGCL was authorised to cancel the projects and retrieve the money with penalties under the Rental Service Contract (RSC), but documents show that it chose to grant further concessions to Techno Engineering.
The second project of the same firm which is located at the Samundari Road in Faisalabad could not sustain its operation after running for a brief period. NPGCL paid Techno Engineering $18.9 million as a 14 per cent advance for the project on April 1 last year.
The NPGCL also revised its RSC for the generation of 60 megawatts instead of 150MW from June 30, 2009. The NPGCL granted another month to the company for generating an additional 90MW of electricity.
An inspection of the plant carried out by Nepra revealed that “even the partially commissioned 60MW had not been (working) since August 11, 2010.” Besides, there was no progress on generation of the remaining 90MW of electricity.
According to Clause 4.4 (b) of the RSC, experts say, Techno Engineering should have been asked to pay $40,000 a day in penalties for the month-long delay, amounting to about $1.2 million.
When the NPGCL approached Nepra for a review of the financial charges and a waiver of the heat rate test for the two power projects, the authority declined the request on the ground that both projects were inoperative.
Nepra said that the sponsor had violated their contractual obligations by deviating from its commercial operation date (COD) even after receiving advance payment.
Nepra observed that there was no progress on ground despite the fact that a seven per cent advance was paid on June 4, 2008.
“After a lapse of one year, when the seller failed to fulfill its obligation, NPGCL instead of invoking penal clauses of the contract once again agreed to amend the contract on June 11, 2009 whereby it agreed to pay an additional seven per cent advance. To-date, there is no physical progress on the rental plant,” defeating the objective of the RPP.
Nepra officials suggested that under the circumstances it would not be in the consumers’ interest to continue with the Sahuwal project as it has lost its utility and there “is absolutely no justification for the relief being claimed by NPGCL in this regard”.
In another instance of violation of rules, the Central Power Generation Company, acting on the directives of the ministry of water and power, had paid $21 million in advance to Walters Power International Limited in violation of rules. The Supreme Court, after taking suo moto notice of the irregularity first reported in The Express Tribune, succeeded in retrieving the money.
Published in The Express Tribune, December 11th, 2010.