Chinese firm gets contract for Pak's Nandipur power project

The Pakistani Government has announced that it had entered into a 10-year contract with a Chinese firm for operation and maintenance of the controversial Nandipur power project.

According to a statement issued by the Water And Power Ministry, the agreement for a long-term operation and maintenance (O&M) of the 425MW plant was signed between the Northern Power Generation Company Limi­ted (NPGCL) and the Hydro Electric Power System Enginee­ring Company (HEPSEC) of China, reports the Dawn.

The contract price was not disclosed.

According to an official, HEPSEC was confirmed the lowest bidder at a total cost of USD 185 million, followed by USD 227.2 million offered by TNB Repair and Maintenance of Malaysia.

At this offered rate, the per unit O&M cost works out at about 85 paisa on furnace oil - almost 80 percent higher than the rate allowed by National Electric Power Regulatory Authority (NEPRA).

The official said that the contractor was required to hire at least 25 percent local workforce for on-job training and would be penalised in case of the plant's efficiency falling below 44 percent, but any higher efficiency gain would go to the contractor without a capping.

The Power Ministry said the decision to outsource operation and maintenance of the Nandipur power plant was in pursuance of the recommendations of the regulator and a policy decision by the government to outsource O&M of new power plants to experienced international operators in line with prevalent industry practice in order to reduce expenditures, and to bring about latest and efficient practices in power plant management.

The project's cost and tariff has been a subject of political and technical controversies since 2008.

The government has been contemplating judicial review of the tariff approved by the regulator.

NEPRA has repeatedly turned down requests by the government and its power companies to assume the total cost of the 425-525MW Nandipur project at Rs. 65 billion while determining its tariff.

However, the regulator has considered the project's cost at Rs. 42 billion in a 30-year tariff that averages Rs. 11.64 per unit.

The government has been seeking Rs. 15.63 per unit to also finance project delays, resultant cost overruns, penalties paid to contractors and the cost of laying a gas pipeline.

The Nandipur plant has been in the limelight for more than five years because of inordinate delays, cost overruns and allegations of mismanagement, corruption and kickbacks.