An unnecessary feud may be brewing between Transparency International Pakistan (TIP) and Pakistan Power Resources (PPR), one of the companies setting up rental power plants. TIP has written a strong-worded letter to PPR over the government's non-responsiveness to the request for documentation on rental power.
In its latest letter dated August 27, TIP informed PPR: "You are a party to contract agreements, and it is in your interest that these requirements shall be met by GOP." TIP also wrote that PPR should "tell your clients" - meaning PPIB and PEPCO - to comply with TIP requests.
Based on a story published in Business Recorder, PPR took the initiative to write to TIP on August 3 volunteering information on its rental power projects. TIP, on August 7, wrote to PPR asking it to use its "good offices" to impress on the government and relevant organisations to furnish TIP with the information. PPR responded on August 17, standing by its offer, requesting relevant agencies to provide data to TIP and to the Public Procurement Regulatory Authority (PPRA).
In its latest response, PPR in its letter on August 29 states: "TIP is an important organisation. We appreciate and unreservedly endorse its objectives. It was for this reason that we approached your organisation, unsolicited ... volunteering information on rental power in general and our projects in particular."
It further said: "It is not merely in our interest as a responsible corporation, but in the interest of the general public that facts and information be available for an informed debate that weighs the merits and demerits of any proposal affecting public life. You have graciously appreciated and acknowledged our initiative in this regard." TIP also appears to have taken issue with PPR's August 17 letter which contends that "a wilful campaign to scuttle power projects for the sake of political point scoring" is being undertaken by opposition politicians.
In the same letter, PPR refers to "a similar campaign [having been] undertaken in the 1990s against IPPs." In response, TIP shoots back citing a World Bank report from 2005 in its August 27 letter: "The fact is that more than 12 IPPs voluntarily reduced their tariff when corruption inquiry was conducted."
PPR's August 29 letter, citing the same World Bank document, rebuts TIP by stating that "there is nothing in this report to support your finding." PPR quotes from the report that "excessive coercion, harassment and heavy-handed legal and other actions initiated by the [succeeding] Government to renegotiate tariffs or cancel contracts contributed to Pakistan's fall from grace in the eyes of the international private sector community."
PPR also highlights the following finding of the report: "coercive tactics (eg arresting/interrogation of IPP company officers and sometimes family members) and threats of project cancellation were being used in attempts to obtain tariff reductions." PPR states that in cases where tariffs were marginally reduced, the report makes clear that "in exchange for these tariff concessions, the term of their power purchase agreements was extended from around 20 years to 30 years."
TIP's August 27 letter refers to PPR's advertisements and states that in the evaluation report of PPIB dated December 1, 2008, the tariff of Gulf Rental Power's 80.5MW RPP at Eminabad is given as Rs 9.55 per unit and the tariff of Independent Power's RPP at Gojra is given as Rs 11.46 per unit.
TIP writes: "Against these electricity cost through rental power plant, you have advertised in the press last week that the electricity from RPP you are supplying at Bhikhi to Pepco is at Rs 5.86. Your advertisement may be true, but why you are charging 100 percent more for Gojra."
PPR in response states that this is "a surprising question" considering that the PPR project portfolio was informed to TIP in its first letter. "PPR has no interest in either of the projects you have referred to," states the rental power producer. TIP also writes to PPR about "non-payment" of dues by KESC to the Gul Ahmed and Tapal IPPs.
"May be your partner," writes TIP, "has contracted" to supply rental power to KESC. "Is it a prudent electricity generation and distribution business practice to ignore cheap electricity and buy costly electricity? SECP has issued notice to KESC for these acts," states TIP.
In response PPR states that neither it nor any of its associated undertakings have any contracts with KESC of "any nature whatsoever." PPR further states that it has no "contract or interest" in the Gul Ahmed or Tapal IPPs. Interestingly, the Tapal Group is also setting up an RPP.
While endorsing TIP's objectives, PPR refers to a blog posting by TIP's chairman in which he has named PPR chairman as having been awarded "most of the contracts." PPR writes: "Through your last letter, you have implicitly acknowledged authoring this posting. Prima facie, this seems to demonstrate prejudgement and prejudice." PPR further writes: "The goodwill earned by your organisation is an asset. The goodwill earned by our corporation, and our shareholders, is also a cherished asset that we shall guard and defend."
PPR offers an olive branch to TIP at the conclusion of its latest letter: "It is in support of the important goals being pursued by TIP that we sought to cooperate and work with your organisation and bring facts to your attention that may assist you in your endeavours. We wish you success and remain at your disposal, should you require information on the rental power model and our projects."
This week, the Federal Cabinet approved the setting up of 2,200MW RPPs despite criticism from Finance Minister Shaukat Tarin. The prime minister stated that IMF and ADB would be reviewing the rental power program. US government's investment arm OPIC is also investing in RPPs here in Pakistan, as was informed by Special Envoy Richard Holbrooke to Pakistan government during his recent visit.
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