National Electric Power Regulatory Authority (Nepra) has approved tariff for the much-delayed 425 MW furnace oil-fired Nandipur Power Project at Rs 11.30 per KWh for 30 years.
However, the regulator did not allow the petitioner to include Rs 24 billion loss to the tariff determined for the project. Northern Power Generation Company in its petition had sought approval of Rs 69.33 billion as project cost. However, the regulator allowed project cost at Rs 45.30 billion. The petitioner had sought a tariff of Rs 18.17 KWh on use of furnace oil and Rs 8.44 KWh on gas. The project has passed through several difficult phases including flawed decision making at a high level, selection of fuel and demurrages charges.
The petitioner submitted that due to the stoppage of construction material at Karachi port, owing to the non-issuance of a legal opinion, the work slowed down and was suspended in April, 2010. A foreign loan facility that was available till August 31, 2011 couldn''t be withdrawn because the legal opinion on the matter was issued on October 21, 2011. EPC contractor demobilised and subsequently served the notice for the termination of the contract agreement on August 17, 2012. For the resumption of work, the EPC contractor agreed on an additional cost of $19 million on account of extension of time claims, $8 million against remobilization and provisioning of $50 million for the inspection / testing repair / replacement, etc, of defective parts as per actual joint inspection/testing by the contractor, the engineer and the employer.
On resumption of the work on the project that was suspended in April 2010, the petitioner negotiated ''amendment-21'' with the EPC contractor on August 2, 2013. According to the petitioner, the following were the salient features of the additional cost: (i) $8 million for remobilization of personnel, equipment and other necessary infrastructure; (ii) $19 million as compensation on account of Extension of Time (EoT); (iii) $40 million for inspection, repacking, testing, repair of Plant; and (iv) $67 million. On this issue one of the commentators, Anwar Kamal stated that independent inquiry should be conducted to actually determine whether the costs claimed are justified or not. According to the commentator, none of the three listed revisions are justified by any stretch of the imagination. It may be noted that delay cost in such huge magnitude, ie $64.804 million has never been allowed in any public or private power plant. As per the dates submitted by the petitioner, the work was suspended in April, 2010 and resumed on October 21, 2013. In between, the plant was left to rust for 1268 days. Keeping in view the past precedent and to be fair to all other IPPs, including Orient, Sapphire, Halmore etc for which the delay cost was not allowed this cost has been disallowed.
According to the petitioner, this includes land preparation costs and civil works not covered in EPC Contract. Under this head, the petitioner claimed $4.84 million. Land and Building section comprises numerous small to medium size contracts. These contracts ranged from Rs 75.81 million for building residential houses/hostel to contract worth Rs 0.172 million awarded for PM inaugural plaque. Under this head, the petitioner claimed a cost such as a stage for Prime Minister visit, development of children, establishment of view point, etc. These costs being excessive and not directly related to power plant''s essential operation have been excluded. Some of the costs lacking proper documentation had been disregarded in the total assessed Non-EPC cost. The petitioner claimed other costs for internal access road dispensary, etc, which though being a genuine requirement, was not backed by any data supporting documents. Such costs were disregarded for the reason that these will be allowed on the basis of documentary evidence at the time of COD. In view thereof, the Authority has assessed a total of Rs 363.835 million out of Rs 487.47 million requested as a reasonable amount for land preparation and buildings.
The petitioner requested a cost of conversion of project from current RFO fuel to gas fuel amounting to $25 million. In addition, the petitioner also requested a cost of $58.644 million (PKR 3,970,260,000) for a dedicated pipeline and other infrastructure required for transmission of gas. In support, the petitioner submitted an SNGPL quotation stating a total cost of Rs 5,567.07 million, out of which Rs 3,970.26 million will be the pipeline cost for Nandipur power project and the remaining for Chichokimalian. The SNGPL has however, linked this agreement to the availability of 1.2 BCF gas from southern sources.
The Authority observed that fuel conversion is a very important issue that requires a thorough technical and financial analysis similar to the one being done for AES''s Lal Pir Pakgen, Saba power, KESC unit 3 conversions from RFO to coal. Addressing this issue may broaden the scope of this petition, which may cause a delay in finalising the determination. The Authority, however, is cognisant that, albeit the conversion may seem beneficial as according to the petitioner, it would add 35 MW with 4% better efficiency than RFO''s. However, as the availability of gas is the major issue affecting the power sector, reaping benefits of gas conversion seems to be a distant dream for this project. The petitioner has not confirmed whether or not the project will have a committed uninterrupted gas supply. At this stage, the Authority considers it unfair towards consumer to include gas conversion and infrastructure related cost of $83.64 million in the project cost while disregarding the realities that no firm gas commitment is available to the project.
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