Matiari to Lahore Transmission Line project: RCOD extended for 6 months after talks with Chinese co

ISLAMABAD: The government has extended Required Commercial Operate Date (RCOD) of $ 1.7 billion declared faulty ± 660kV HVDC Matiari to Lahore Transmission Line project for six months, after negotiations with the Chinese company, well-informed sources in PPIB told Business Recorder.

The 878 kilometers 4,000 MW project is being executed by Pak-Matiari Lahore Transmission Company (Pvt) Limited, on Built-Own-Operate-Transfer (BOOT) basis for a term of 25 years. The construction of the project is complete and is under testing and commissioning phase.

The project will evacuate power from the new generation units located in the south including Thar coal-based projects. The project is included in the CPEC portfolio. The ECC on July 25, 2017 approved the Security Package Documents, ie, Implementation Agreement (IA) and Transmission Services Agreement (TSA) which were subsequently executed on May 14, 2018.

The NTDC will be responsible for operation and maintenance of the transmission line for which an Operation and Maintenance (O&M) agreement was executed with the Company on May 14, 2018.

According to sources, on December 2, 2020, severe frequency obligations were observed in the system when the project was under monopole low power testing; consequently, the testing was stopped and the test was declared failed by NTDC and Owner Engineer M/s Hatch, Canada (OE) of NTDC. The company submitted Root-Cause Analysis report (RCAR), which was reviewed by both Independent Engineer (IE) & OE.

OE declared the Certificate of Readiness as null and void and IE & OE recommended certain additional measures to be taken at Matiari converter station prior to start of testing.

Thereafter, NTDC revisited all technical and contractual obligations which were to be fulfilled by the company under the TSA and issued a Notice of Dispute (NoD) on December 11, 2020 highlighting various contractual obligations not fulfilled by the company and challenged the certificate of readiness as well as testing and commissioning of the project pursuant to section 8.9 of the TSA.

Afterwards, as a result of extensive discussions between NTDC, the company, OE and IE, way forward on resolution of issues was agreed on the issues raised under the Notice of Dispute and MoU was signed between the company and NTDC, which was subsequently approved by respective BoDs of NTDC and the company. In the light of MoU, draft addendum agreement to the TSA and O&M Services Agreement were agreed between the company and the NTDC and their respective BoDs accorded approval for it.

Pursuant to the terms of addendum to the TSA, it has been, amongst others, agreed between NTDC and the company that during pre- COD period from (March 1, 2021to August 31, 2021) the company shall be paid as per the maximum demonstrated capability successful tested in accordance with the final tariff approved by Nepra.

Furthermore, the agreed changes were primarily made on account of the reason that the project activities and certain obligations to be fulfilled by respective parties were impacted due to Covid-19 pandemic and consequently Required Commercial Operations Date (RCOD) of the project needed to be extended from March 1, 2021 to September 1, 2021 and corresponding changes were necessitated to be made in respect of testing/training modalities.

The sources said, earlier, the Cabinet Committee on Energy (CCoE), in its decision on February 1, 2018 fixed RCOD of the project as March 2021 while considering timelines of various generation projects sought to be evacuated via the project. It was also mandated that in case of commissioning of any such project is delayed, then such projects will pick up pro-rata Liquidated Damages (LDs) under their respective PPAs so that financial loss to NTDC should be avoided.

As a consequence to the proposed change in definition of RCOD in the TSA by NTDC, the definition of RCOD in the IA of May 14, 2018 executed by and between the company and the GoP also needs to be made consistent to avoid any mismatch of obligations of the company under both agreements. Accordingly, an amendment to the IA has been made which was also approved by the PPIB Board in its meeting held on March 4, 2021.

When, PPIB was asked has any penalty been imposed on Chinese company for failed test of the project, it was informed “No that was not required in the agreements. Company can carry out many tests after analyzing the reasons for failure and correcting those parameters.” Another senior official who is associated with the project told this scribe that as per Transmission Services Agreement, if the company fails to dispatch 4000 MW for reliability test for six hours, then it will be penalized. Presently, 800 MW is being transmitted through this line.

Copyright Business Recorder, 2021