Uch Power Private Limited (UPL), a 586 mw low Btu gas based independent power producer (IPP), has reportedly threatened to close down the complex and 'invoke a Pakistan political majeure event', if additional security is not ensured, sources in PPIB told Business Recorder.
UPL, located in Balochistan, was developed and operated under the protection(s) provided by the Government of Pakistan (GoP) through the Implementation Agreement (IA) of November 19, 1995. UPL supplied electricity to national grid under Power Purchase Agreement (PPA), executed between the Company and Wapda, while the government of Balochistan also signed an Assistance Agreement on March 4, 1996 with UPL.
Pursuant to article XII of the IA, GoP had agreed to provide additional security if UPL requests in case of deteriorating law and order situation. Consequently, UPL has obtained a security plan from Frontier Corps (FC) for securing the 10 kilometre periphery around the project site. The proposed plan would strengthen the existing security arrangements of the project. The proposed plan envisages a recurring expenditure of Rs 5,663,722 per month, besides Rs 19,950,920 as one-time establishment expenses.
Sources said that the Ministry of Interior has also vetted the cost estimates given by FC. UPL management, in good faith and out of its legal obligations, has offered reimbursing Rs 5,000,000 from the one-time security establishment cost(s). At the same time, it was already reimbursing more than $100,000 per year on deployment of levies. The additional security arrangements will remain in place till the security situation improves around UPL and can be terminated as and when necessary.
According to sources, provision of additional security is obligatory for the Government of Pakistan pursuant to IA. Non-provision of security may not only result in leaving UPL power complex vulnerable to sabotage, having huge financial repercussions and outage of the 586 mw, it may also lead to termination of the agreements, essentially hampering the forthcoming expected investment of $495 million in Uch-Il project. The UPL management has also informed that it could not expose the personnel and would, therefore, be constrained to close down UPL complex and invoke a Pakistan Political Majeure Event.
Sources further stated that in order to reduce the risks of higher level damage to power complex, the Company would build underground fuel tanks in 12 months. During this time the existing tanks would be emptied and any Force Majeure Event during the re-building process of fuel tanks would be treated as Other Force Majeure Event for first seven days (ie increasing the PPA term for corresponding days).
The Ministry of Water and Power in its summary to the ECC proposed that plan of providing additional security as given by FC and vetted by MoI be ratified and the costs be incurred on implementation of that security plan be borne by power purchaser through the pass-through arrangement provided in the PPA. Sources said that the government has approved the proposal of the Ministry of Water and Power for provision of additional security to Uch Power (Pvt) Ltd.
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