Guddu plant deal raises doubts about IPPs, RPPs

[LahoreEstate]

The Pepco finalised a $602 million deal with China for raising the Guddu power plant’s capacity from 220MW to 747MW.—File photo

Pakistan Cabinet approves 14 rental power plants LAHORE: The Pakistan Electric Power Company (Pepco) on Saturday finalised a $602 million deal with the Harbin Power Engineering of China for raising the Guddu power plant’s capacity from 220MW to 747MW.

Interestingly, the deal finalised at $602 million for 747MW would cost around $800,000 per megawatt, which is almost 33 per cent less than what the independent power producers have been charging — $1.2 million to a megawatt. Electricity from rental power plants will be even costlier.

Due to the lower rate, the power price from renovated Guddu plant, at current price factor, would only be Rs4.29 per unit.

The average per unit price, which all IPPs coming on line over the next one year are charging, is a staggering Rs10.38.

‘The deal with the Chinese company only exposes the weaknesses, or corruption, of the arrangements with the IPPs or rental power plants,’ a former Wapda official said.

Had the same quantity of power been arranged through the independent power producers, it would have cost the nation around $896 million — at average rate of $1.2 million to a megawatt, he said.

The deal includes financial arrangements, with the Exim Bank (China and USA branches) providing 85 per cent of finances. Pakistan will arrange the remaining 15 per cent.

Spread over three years, the contractor would replace all four generators of Guddu power plant. Working under one of three generation companies (Genco-II) of Pepco, the Guddu plant is one of the oldest and has outlived its utility and stipulated life years ago.

Built in the early sixties, the plant had been producing only 220MW against an installed capacity of 450MW and had been a drain on financial resources of the company.

Under the deal, the contractor would bring 75 per cent open cycle generation (gas turbines) online within two years and the rest (combined cycle, or steam turbine) within one year — completing the entire project in three years.

The Economic Coordination Committee (ECC) had approved the project during the last financial year, allocating 15 per cent of the Public Sector Development Programme for such projects, which would go into financing the Pakistani part of the investment.

Speaking at the signing ceremony of the deal, the managing director of the Pepco termed it a part of the ‘exit strategy form expensive rental power’. The company is committed to retiring rental power within three years.

The company has finalised the deal at competitive market prices with highest efficiency of all installed and under construction projects in Pakistan with net efficiency of 54.5 per cent.

The Harbin Power Engineering (HPE) has also been involved in projects at Guddu, Kotri, Faisalabad, Jamshoro, Muzafargarh and Malakand. They will use gas turbines from General Electric (USA).

The project was signed by Mr GUO-YU, President of Harbin Power Engineering, and Mr Tahir Basharat Cheema of Pepco.

http://www.dawn.com/wps/wcm/connect/dawn...pps--bi-09