ISLAMABAD: The government on Monday 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. The agreement is valid “for a period of ten years or two major inspections, whichever is later.”
The contract price was not disclosed but previously it was allowed 48 paisa per unit by the National Electric Power Regulatory Authority (Nepra), now working under the administrative control of the power ministry under a recent government decision.
According to an official, the Chinese bidder had been selected through a process under which bids were opened on April 11 last year and finalised on Aug 6. HEPSEC was confirmed the lowest bidder at a total cost of $185 million, followed by $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 per cent higher than the rate allowed by Nepra.
The regulator had allowed the O&M cost on furnace oil and gas at 48 and 34 paisa per unit (Kwh).
The per unit O&M tariff was significantly higher than that of about 62 paisa per unit for the 1292MW Hub power plant and about 35 paisa per unit for AES-Lalpir, which were originally signed at 35 and 16 paisa per unit in the late 1990s and has since gone up with indexation.
As a consequence, the government would have to seek review of Nepra’s determined tariff and prove that lower than this rate was not available in the world or otherwise take a hit on its own return of equity, resulting in economic non-viability of the plant.