TIP's claims fraudulent, violating its own charter: PPR

[Naveed Yaseen]

ISLAMABAD (September 14 2009): Pakistan Power Resources (PPR) has strongly objected to the claims made by Transparency International Pakistan's (TIP) Syed Adil Gilani in an interview with Business Recorder and which were reproduced in the story, 'Claim that RPPs charges only slightly higher a myth: TIP' published on September 13. PPR has also accused TIP of violating its own charter.

"PPR approached TIP of its own volition volunteering information on the rental model in general and our projects in particular," states PPR in response to the story. "TIP, while appreciating our initiative, has repeatedly refused our offers. PPR has also supported TIP's requests to the relevant governmental organisations for information on RPPs." PPR states that TIP's claims do not comport with reality. "The expertness that is being feigned on the subject is nothing beyond highly irresponsible, ill-conceived and defamatory fiction. We are forced to respond to such wilful disinformation in the interest of setting right the public record."

PPR states: "Mr Gilani surprisingly claims that 'KESC has contracted' a five-year project with Walters Power International (WPI) 'with bank guarantee or LC' for the '202MW' Korangi Power Project which would sell electricity at 'Rs 23.34 to KESC'. He has further claimed that this is at a 'higher cost than IPPs' and that KESC is 'not paying cost of two IPPs, Gul Ahmed and Tapal, arrears of Rs 7 billion which has forced them to close down.' Mr Gilani then concludes that 'this is an illegal contract'. "These are unfortunate, wilful misrepresentations. WPI, which has a common shareholder with PPR, is setting up the 205MW Korangi Power Project. Mr Gilani has been informed through our letter of August 29 and is well aware that neither WPI nor PPR has no-repeat no-contract of any nature whatsoever with KESC. Furthermore, to date, no mobilisation advance or bank guarantee or sovereign guarantee has been extended to the project.

The signed, fixed tariff for the project is US cents 4.27 per unit not including the fuel cost. Mr Gilani would be well advised to verify his facts and to direct his concerns regarding KESC to that particular organisation.

"Mr Gilani further claims that the cost of power from RPPs being 'slightly higher' than the cost of power from IPPs is 'only a myth and wrongly advertised by the RPP companies in press and also quoted by ministers'. It is surprising that Mr Gilani can make his claims with such certitude when he himself has repeatedly bemoaned the non-responsiveness of the Government to his requests for documentation on RPPs and also repeatedly refused our offers to provide him with the information that we have available.

"Mr Gilani further claims as 'controversial' an RPP contract signed in '2007' for a '135MW project at Sheikhupura with Iqbal Z. Ahmed of Pakistan Power Resources, based on gas fuel for three years'. He further claims that the 'tendering process was not known; no advance payment was made, and the time of commencement of the project was 120 days'. "PPR wholly rejects this claim as spurious and mala fide. PPR's 136MW Power Plant and GE's 150MW Power Plant are the only two RPPs currently operating in Pakistan. Both RPPs are in District Sheikhupura, commenced production in late 2007, and were awarded through an internationally competitive bidding process. PPR was provided 7 percent mobilisation advance and a confirmed standby letter of credit, in accordance with its contract for the same.

"Mr Gilani's 'recollection' that WapdaA signed 'three agreements for rental power between 2006 and 2007 with Northern Power Generating Company' for a period of 'three years only' and that 'no advance payment was made under the agreements' is flawed. His claim that the 'fixed rental charges per kWh in those agreements were in descending order every year, ie, Rs 3.09 in first year, Rs 2.36 in the second year and Rs 2.35 in the third year' is completely inaccurate. Again, given his self-confessed lack of information on the subject, such claims are not only highly suspect but also entirely incorrect.

"The tariff for PPR's 136MW Bhikhi Power Plant is fixed at US cents 3.13 per unit. Furthermore, the actual cost of power per unit from this RPP to Wapda for the period December 2007 to December 2008 has been Rs 5.86. Of this, PPR has received Rs 2.48 per unit while Rs 3.37 is the fuel cost accruing to Sui Northern Gas Pipelines Company Limited (SNGPL). This is based on audited information which Mr Gilani would do well to independently verify.

"Mr Gilani also claims that 'very old plants' shall be employed as RPPs. Mr Gilani is well aware that all furnace oil based RPPs are contractually obligated to ensure an availability of between 85-88 percent while all gas-based RPPs are contractually obligated to ensure an availability of 90-92 percent. In case RPPs fall short of these mandatory availability requirements, they are subject to stiff financial penalties. However, Mr Gilani concedes that TIP's 'concern' is to review any 'post-tendering relaxations'. We understand that the Public Procurement Regulatory Authority (PPRA) is looking into this concern as is the Asian Development Bank (ADB). We unreservedly support this effort. In the meanwhile, Mr Gilani would be well advised to refrain from making claims that cannot be defended in a court of law.

"Mr Gilani also cites Julia M. Fraser's May 2005 report, 'Lessons from the independent private power experience in Pakistan,' for the Energy and Mining Board of The World Bank Group to draw the dyslexic lesson, as per his letter to PPR dated August 27, that 12 IPPs 'voluntarily reduced their tariff when corruption inquiry was conducted'. What Mr Gilani fails to mention is that the same report quotes the then US Secretary of Energy as describing the 1994 Power Policy as 'the best energy policy in the whole world' and then describes the tactics adopted by the succeeding government to negate this acclamation.

"The report states that 'excessive coercion, harassment and heavy-handed legal and other actions initiated by the [succeeding] Government to renegotiate tariffs or cancel contracts contributed to Pakistan's fall from grace in the eyes of the international private sector community'.

The report states that 'coercive tactics (eg arresting/interrogation of IPP company officers and sometimes family members) and threats of project cancellation were being used in attempts to obtain tariff reductions'. The report states that this strategy was 'unsuccessful'. Referring to cases of marginal tariff reductions, the report makes clear: 'In exchange for these tariff concessions, the term of their power purchase agreements was extended from around 20 years to 30 years'.



"In its letter dated September 3, PPR informed TIP: 'You are aware that we have through our letters of August 3, 17 and 29 repeatedly offered to provide you with documentation on rental power in general and our rental power projects in particular. We have done this of our own volition in order to introduce reason and responsibility into the discussion on rental power and to facilitate your work. You have through your letters of August 7, 27 and 30 repeatedly refused our offer. This is your prerogative. You continue to state that the Government is non-responsiveness to your requests. We have made requests on your behalf to the Government. Whether or not the Government provides this information to you, it is their prerogative. We shall now no longer be responding to any of your letters or queries.'

"PPR is a responsible corporate citizen. PPR believes that the sustainability of any project is only possible if the process of its award and implementation is transparent and unimpeachable. PPR also believes that Mr Gilani's statements are in violation of the Statement of Vision, Values and Guiding Principles issued by Transparency International's global office in Berlin. PPR shall not simply ignore personalized, baseless, and defamatory attacks against it, its officers or shareholders. PPR shall jealously guard the goodwill it has earned by setting up power projects in the shortest possible time to ensure the availability of affordable electricity for Pakistan."

http://www.brecorder.com/index.php?id=960808