Ministry defends outsourcing of O&M of Nandipur project

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Ministry defends outsourcing of O&M of Nandipur project

ISLAMABAD, Feb 11 (APP): The Ministry of Water and Power
while strongly defending it’s decision to outsource the operation and maintenance of the Nandipur Power Project said it had been done to bring in world class efficiency.
The Ministry spokesman in a statement dismissed the
“incorrect” report about the Nandipur Power Project published in a section of press said the news was based on partial or misconceived facts and data.
The statement said the Nandipur project had been put
into generation against all odds.
“The News item has done little more than to create a
negative impression about a positive effort by the Government to salvage an almost lost cause, which if abandoned will have caused billions in costs and payments and damages,” the clarification added.
The statement said the decision to outsource the
operation and maintenance of the Nandipur Power Plant was in pursuance of the recommendations of the Regulator, and a policy decision by the Government of Pakistan to hand it over to experienced international operators in line with prevalent industry practice.
The objective was to reduce expenditures, and to bring about latest and efficient practices in power plant management, it added.
The Ministry said after a transparent public procurement,
process carried out in line with the PPRA rules.
The agreement for long term operation and maintenance of
the 425 Megawatt Nandipur Power Plant was signed at Nandipur between Northern Power Generation Company Limited (NPGCL), (a GoP owned corporate entity working under the management of the GENCO Holding Company Limited), and M/s Hydro Electric Power System Engineering Company of China (HEPSEC) for a period of ten years or two major inspections, whichever is later.
After evaluation and scrutiny of the bids, HEPSEC’s bid
was found to be the lowest responsive bid out of the four bidders. HEPSEC is a subsidiary of Power China Group, and has wide ranging experience of providing operations and maintenance services for power plants all over the world.
The Nandipur Power Plant has been fully operational
since its COD in July 2015 and was currently operating on furnace oil.
The plant is destined to run on gas and for that very reason, work is already underway to convert the Plant’s operation to natural gas.
With this conversion, the generation capacity of the Plant will increase from 425 Megawatt to 525 Megawatt, the statement from the Ministry said.
NEPRA has given tariff to the plant, including the O&M costs, both on RFO and gas as fuel.
The costs related to fixed and variables components of the costs along with the application of indexation, as per NEPRA determination, gas
part is reasonably and workable, the statement said.
For the Furnace Oil part although the fixed tariff was
also within limit after indexation however, the variable part was lower and could have apparently resulted in cash loss, had the plant continued to run on Furnace Oil.
The Ministry said that this issue however has been
addressed by conversion of plant on gas which was in progress and would complete by end April 2017.
The Ministry said the total O&M tariff allowed by NEPRA,
on gas operation is Rs 0.543/unit and lowest bid received was Rs. 0.4873/unit, a saving of Rs. 0.0557 per kWh. This will provide additional room to the GENCO to cover any unforeseen expenses. On RFO operation, NEPRA has allowed Rs 0.697/unit O&M costs and bid price was Rs 0.8595/unit.
It is worth noting that on annual basis, total O&M cost
allowed by NEPRA on gas operation is Rs. 2.113 billion/year and the contracted amount is Rs 1.896 billion/year which will provide positive cash flows.
The Ministry said that in order to avoid losses on
Furnace oil operation, it has been ensured that the O&M
contractor’s taking over of the plant and the gas conversion is synchronized.
The clarification said that the news item was incorrect
as it pointed that contracted costs were higher than NEPRA allowed costs. In fact, the contract will be carried out within the allowed tariff, the statement said and added that the comparison with plant with HUBCO and other oil based plants was irrelevant as Nandipur is a gas based plant being temporarily run on oil.
“The news items have ignored this vital element of the
project and has just concentrated on loss of variable
components during those few days when plant might be run on RFO.”
“The reporter has completely ignored the positive gas
tariff on which the plant will run for most of the contract
time. The benefits of guaranteed generation due to O&M
contract have also been ignored,” the clarification said,