Four $2.3bn power projects declared ‘problematic’

ISLAMABAD: The Ministry of Economic Affairs has reportedly declared four power sector projects worth $2.3 billion problematic and directed the Power Division and its attached organizations to expedite implementation of the projects.

This was the crux of the third follow-up meeting of National Coordination Committee (NCC) of Federal Energy Sector (EES) held in the Ministry of Economic Affairs, which reviewed progress made on its decisions taken on November 5, 2022, February 25, 2021 and May 26, 2021 meetings

The meeting was attended by Special Assistant to Prime Minister, Additional Secretary, (Power Division), Chief Foreign Aid, Planning Commission, and heads of implementing agencies.

Joint secretary (EC), EAD, briefed the committee on the background and the purpose of the meeting, and delivered a short presentation, highlighting the decisions taken on May 26, 2021. He apprised the committee that the share of Federal Energy Projects is $3.4 billion of which $2.3 billion is rated as problematic.

He emphasized the importance of federal energy sector projects, and the need to address the issues of problematic projects which are still pending, on urgent basis, especially those facing chronic delays.

The Minister for Economic Affairs, Sardar Ayaz Sadiq, who resigned from the office to campaign in the 20 critical by elections in Punjab to be held on July 17, 2022 (tomorrow), stressed the need for setting milestones/ deliverables with timelines for better coordination and monitoring. He also directed that renewable energy (specifically solar & wind) options be proactively explored.

Secretary, EAD acknowledged Pakistan is dependent on energy imports because there is lack of investment in indigenous resources of hydro, natural gas and lignite. Biomass is the largest energy source and due to energy costs the governments has decided to stop setting up new coal-fired power plants because of environmental issues. Therefore, non-traditional indigenous energy inputs need to be optionally utilized.

The problematic projects, their issues and decisions taken by the Committee are as follows:

(i) Jamshoro power generation project unit-1 funded by the ADB with an amount of $688 million of which $201 million has been disbursed. Total financing for Unit-II was $305.8 million, of which the share of IsDB is $100 million, followed by OFID, $72 million, SFD, $91 million and KWD $42.8 million. The signing date of project was February 12, 2014, whereas its closing date was March 2019, which was extended to June 30, 2022.

The main unresolved issues of this project are delay in acquisition of land for ash disposal site and lack of clarity in Unit-II.

Joint Committee Secretary (EC), EAC informed the meeting that allotment of land (100 acres) for the ash pond by government of Sindh was a longstanding issue, adding that at a recent meeting, Chief Secretary Sindh directed SMBR to revise the land rates, after which a decision to allot the land at revised rates will be made. The second longstanding issue is pending with the Federal Ministry of Energy regarding Lot-II which includes 2nd power plant & auxiliaries for Lot-1.

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The chair inquired about the reasons for delay in the project and resultant extensions, and asked the government of Sindh about the status of 100 acres of land for ash pond which is pending since long. He reiterated that a time frame should be provided for allocation of this land and strictly adhered to by the Revenue Department Sindh.

Senior member board of revenue (SMBR) Sindh explained that the matter was under process and a summary shall be sent to the Chief Minister office soon. He said the work on the project is currently at a standstill due to revision of land rates.

Project Director -JPCL added that Chief Secretary Sindh recently issued a notification for revision of 2017 land rates which are still in practice. As per law, land rates have to be revised after every three years. Therefore, further delay is expected in acquiring land for ash pond as rates are currently being revised by the deputy commissioners.

The chair directed the project director to follow the CM Secretariat on status of ash pond land. He also inquired about the status of Lot-II from the Secretary Power Division.

Power Division noted that the feasibility study of Lot-II is under process. Both Lot-1 and Lot-II have many things in common, some of which have already been completed. The MoU for Lot-II construction was signed in December 2019 but the donors (IsDB and OPEC Fund for International Development) are un-committed.

SAPM maintained that the chronic issue of the project should have been raised at the relevant approving forum like ECNEC. He pointed out many of these delays could have been avoided.

The chair, while showing his displeasure at the project delays directed the EAD to write to the PM Inspection Commission to probe the matter jointly with Planning Commission and submit a report to the PM Office. He further instructed the Project Director JPCL to submit weekly progress on the project to the Minister’s office.

(ii) Second Power Distribution Enhancement Investment Program (T1-AMI/ advance metering) in IESCO and LESCO funded by the ADB. The key issues of this project are lack of ownership and clarity on project scope.

Joint Secretary ADB stated that in view of the CCoE decision, Power Division presented a position paper on the project to ECNEC for decision which dropped the LESCO component and directed to move ahead with IESCO component on a pilot basis.

The meeting was informed that all formalities before awarding the project of installing 879,000 smart meters in Rawalpindi circle have been completed. The contract agreement will be signed in July 2022. All these meters will be installed in three years’ time which would require project extension by one year.

The chair showed concern at slow pace of installation and asked to expedite it. He further directed to complete the project before June 2024.

The meeting decided that no project extension request would be entertained. ISECO was directed to complete the project by June 2024. EAD will expedite work on PMU establishment and preparing a dashboard for each donor assisted project.

(iii) National Transmission Modernization (Phase-1) (NTMP) of NTDC is being funded by the World Bank with a loan amount of $425 million of which $2 million has already been disbursed. The closing date signed on June 13, 2018 is January 31, 2024.

Major issues of this project is delay of 24 months due to late hiring of Consultant and under staffing of PMU, delays in finalization of four bidding packages and award contracts and delay in land acquisition at Nowshera and Islamabad West.

The chair took serious note of implementation delays of NTMP including land acquisition for Islamabad West and Mansehra Grid Stations by NTDC. He desired the NTDC to take immediate measures to overcome the capacity issues and get rid of inefficient staff. NTDC informed that all pending contracts have been finalized.

(iv) CASA-1000- The project which is being executed by NTDC is being funded by World Bank and IsDB with a loan of $ 220 million of which $24 million has already been disbursed. The signing date of project was May 11, 2015 whereas its closing date is May 31, 2023. Major issues of this project are delay in mobilization of contractor due to land acquisition issue at Nowshera (1300k). Delay may attract LDs around $ 400 million per year and $30 million extra project cost.

The Chair raised serious concerns on the slow implementation of the project. NTDC clarified that implementation of the Pakistan part of the project is now smooth. However, project implementation in Afghanistan part is halted which may delay the project.

The meeting decided that NTDC will finalize arrangements on reverse flow under the project. It will expedite utilization of available grant financing to avoid its cancellation. Power Division will strengthen its M&E capacity at Ministry level to ensure proper monitoring of projects.

Copyright Business Recorder, 2022