NPPMC declines to clear Rs15b penalty imposed on two Chinese companies

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ISLAMABAD: The National Power Park Management Company (NPPMC) has refused to give an end to a penalty worth Rs15 billion it imposed on two Chinese companies for a five-months delay in the construction of the 2400MW Haveli Bahadur Shah and Baloki power plants, said sources.

Reliable sources in the power sector disclosed to Pakistan Today that NPPMC, a subordinate department of the federal government while keeping in mind the interest of the country has so far declined to give an end to the Rs15 billion worth penalty it had earlier imposed on the two Chinese companies – Harbin Electric International and Power Construction Corporation of China.

They also said that NPPMC’s former CEO Rashid Langrial had earlier imposed a penalty worth 10 per cent of the engineering, procurement and construction (EPC) cost on the two Chinese companies as they had failed to start commercial operations for the two plants on an agreed date.

They said the two Chinese companies were to start the commercial operations of the two plants in December 2017 and January 2018 respectively. However, a committee to be headed by the cabinet secretary is likely to be formed in Lahore to settle the matter of the penalty.

The two Chinese companies are not authorised to approach the London court for settlement of the matter as per agreement. And, in case of a victory from the committee headed by the cabinet secretary, the EPC cost of the two power projects will witness a further Rs15 billion decline, said sources.

Documents available with this scribe also revealed that due to the delay in power generation from the two plants, the country has faced an estimated loss of Rs15 billion.

NPPMC had inked an agreement in May 2015 with the Power Construction Corporation of China and Alqavi joint venture for the construction of 1230MW Haveli Bahadur Shah power plant. Similarly, NPPMC signed an agreement with Harbin Electric International and Habib Rafique Private Ltd –joint venture- for the construction of 1230ME Baloki power plant.

Power Construction Corporation of China was bound to start operations of the Haveli Bahdur Shah power plant with full installed capacity of 1230MW by 9 January 2018, while Harbin Electric International was to commence operations for the 1230MW Baloki power plant by 20 January 2018. However, due to the delay by the Chinese companies, NPPMC had to impose a penalty.

Any deduction from the amount of penalty will be made from the final payments to these companies, informed sources.

It was also learnt that the former chief minister of Punjab Shahbaz Sharif had allegedly controlled the two power projects against the very spirit of the 18th constitutional amendment. They said that ex-CM and his son Salman Shahbaz had attended a meeting which was held under former Prime Minister Shahid Khaqqan Abbasi to discuss the issue of reinsurance of these two power plants. There should be no interference form the provincial government in the projects pertaining to the federal government, opined sources.

Official sources in the energy ministry said that although a team of former CM Punjab had constructed the Nandipur Power plant ostensibly against the rules and procedures, the power project was closed for two years only after the one week operation.

They said that after examining the standard of work and material used in the said two plants (Haveli and Baloki), the National Insurance Company Limited (NICL) and Finance Ministry had expressed their inability to award insurance to the 2400 MW power plants. They also said that the Chinese companies are not authorized to approach the London court for arbitration/settlement as first time the clause to approach London court of arbitration is not made part of the billion dollar worth agreement inked with international companies. Pakistan had faced failure many times in the London court of arbitration. For example, the country faced failure in defending Reko Deq and Karkey rental power company’s cases.

It is pertinent to mention here that a clause to approach London court of arbitration for settlement of issues was made part of the agreement signed with Independent Power Producers IPPs) in the past.  And, the IPPs had approached London court of arbitration for settlement of dispute where Central Power Purchasing Agency (CPPA) failed to prove his argument and failed to defend Rs 6 billion worth case.

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