Nandipur power project to collapse if it gets operational

ISLAMABAD: The Nandipur power project debacle has taken a new turn as in case it gets operational and generates 425-450 megawatts electricity from now onwards, it will collapse and will turn out to be a huge liability of the government as under the existing tariff of Rs11.3073 on furnace oil determined by Nepra, its electricity generation cost is not recovered.
With the costs and tariff determined by the learned Authority, the project will not be able to even pay the lenders’ payments and it will collapse like other Gencos (electricity generation companies) within days, reveals Northern Power Generation Company Limited (NPGCL) in its review petition on Nandipur power project submitted with National Electric Power Regulatory Authority (Nepra) of which a copy is available with The News.
Even if the power plant gets operational, it will continue to inflict mammoth loss of Rs30 billion to Pakistan’s national exchequer and it will be a huge liability of the government, one of the members of the board of directors of NPGCL confided to The News.
More importantly, he divulged, if the said project gets operational and generates 425MW electricity, then the national exchequer will have to brave loss of Rs6.5 on every unit to be produced by the plant to cater to the full generation cost of one megawatt and if the government does not pick up the financial damage, then Rs6.5 per unit will be added to the circular debt as the tariff given by the Nepra stands at Rs11.3073 on furnace oil against the tariff of Rs18.168 per unit.
The additional loss to the exchequer due to simple cycle operations is estimated at Rs5 per unit in addition to Rs6.5 per unit not allowed by Nepra. This means if the plant is operated for one month, then the combined additional loss will stand at Rs2.5 billion that will be at Rs30 billion if the project is run for one year.
This means if the project comes on stream, then there is a huge loss to the national exchequer at the existing

tariff and in case it is not allowed to get operated then the huge amount of Rs58 will go into drain.
However, the petitioner seeking the review of the tariff already given by the regulator dated April 4, 2015 pleaded that tariff determined by the Authority will not help recover the electricity generation cost, resultantly, Nandipur power plant will collapse in case it gets operational from now onward.
The board of directors’ meeting authorised Muhammad Shoaib Rasheed, Chief Executive Officer NPGCL, for filing of leave for review with Nepra, who as a petitioner asked the regulator to approve, and revise the tariff based on actual expenses. In the petition, NPGCL sought the determination of operation and maintenance (O&M) tariff on realistic basis for HSFO Fuel with multiple of 3.5 to gas O&M and fix O&M tariff along with due indexation.
The petitioner mentioned and argued that incurred and verified EPC (engineering, procurement and construction) cost amounting to $382.52 million should the part of the tariff. He also asked for inclusion of IDC (interest during construction) at actual for total construction period. The NPGCL also asked Nepra to include non-EPC costs of $46.07 million. The petitioner also urged to include the component of financing fees, saying it should be calculated and allowed at 3 percent of financing as per precedence.
In addition, the petitioner advocated for the inclusion of the cost of the spare parts amounting to $15 million in the cost of the project which should be reflected in the tariff. “The gas connection costs should also be allowed in the tariff,” the petitioner pleaded, adding, “Indexation base of conversion rates for ROE (return on equity) and ROEDC (return on equity during construction) should be of Rs90.” The petitioner stressed that ROEDC should be calculated on FIFO basis instead of weighted average, saying the project’s thermal efficiency to be accepted as 44 percent for HSFO fuel.
The petitioner also asked for adjustment mechanism for working capital tariff and demanded omission of time period clause from determination. The NPGCL in the leave for review petition also pleaded that open cycle tariff should be allowed against demand of NPCC (national power control cell) stressing the regulator to rectify the IRR (internal rate of return) promised to the investor by allowing the above said adjustments.
Secretary Water and Power Younas Dagha was earlier phoned, sent many SMSs seeking the answers of the questions that include where does Nandipur power plant fall in the merit order if it generates electricity on furnace oil and what is the electricity generation cost by the project and does the tariff given by Nepra fulfils the generation cost of electricity of the project, he did not respond till the filing of this report.
The questionnaire was sent on September 13 (Saturday last), but there was no response and then The News again reminded him on Sunday of the SMS and sought the detailed answers, but the secretary stayed unmoved and opted to remain non-responsive.
Then spokesman for the ministry Zafar Yab Khan was also contacted and sent the same questionnaire. He first promised to arrange the answers from the secretary of the ministry, but even after lapse of three days Zafar Khan did not provide the answers, saying, “The issues you have highlighted in the questionnaire, ministry is not in apposition to respond them and you better make contact with managing director of Nandipur.” However, Capt Muhammad Mehmood, MD Nandipur power plant, first showed willingness to discuss and answer questions but he did not do so despite many attempts made by The News.
However, the document pertaining to review petition clearly gives the answer that Nandipur project is not feasible under the existing tariff and if its get operational it will turn out to be huge liability.