ISLAMABAD: The government’s plan to auction old and defunct public sector generation plants under Genco Holding Company Limited (GHCL) has hit a major roadblock, with the first auction failing to generate any proceeds and the second round failing to take place on the scheduled date. Sources indicated that internal resistance and an inability to secure binding contracts have led to a policy shift, with the Energy Task Force now considering transferring all remaining power plants to Wah Industries through a government-to-government (G2G) arrangement.
The Energy Task Force, led by Lt Gen Zafar Iqbal, was tasked with managing the auction of obsolete machinery and equipment from defunct power plants, a key initiative aimed at reducing operation and maintenance costs. However, despite initial optimism, the first round of the auction, which featured nine old plants, only garnered qualified bids for seven plants totaling Rs9.05 billion, slightly above the reserve price of Rs8.07 billion. Notably, no international bidders participated in the process.
The lack of international interest was compounded by delays in the payment process. As per the auction rules, the successful bidders were required to pay 100% of the bid amount in advance or through four installments within three months. However, payment delays persist, and despite contractual clauses, Genco’s top management did not enforce penalties or issue delay notices, raising concerns over the handling of the process.
For instance, M/S Daraza Builders secured six contracts, including the Rs1.88 billion deal for the 147MW Kotri Power Plant, but the required payment was not received, and the company failed to meet its obligations. Similarly, Genco-II (CPGCL) returned the bid security of Rs96 million for the 50MW Sukkur Plant due to a lack of contract finalization.
In the case of the 57.2 MW Quetta Power Plant, a second-phase bid of Rs601 million was submitted by Perfect Tel Company, but payment delays continued without resolution. Meanwhile, Genco-III (NPGCL) was scrutinized for failing to sign contracts for the Multan Cantt (20MW) plant for three months post-auction.
Faced with these ongoing delays and procedural lapses, the Energy Task Force decided to consider a G2G arrangement, bypassing the auction process entirely. Wah Industries, a Ministry of Defence entity, could take over the assets as part of this new approach by the end of the current month.
This marks a significant shift in the government’s strategy to deal with non-performing assets and underscores the challenges in privatizing or offloading public sector assets in the energy sector. The move could potentially alleviate the fiscal burden of maintaining the defunct plants, but it also highlights the difficulties in executing large-scale reforms in state-owned enterprises.
