Sunday, November 21, 2010

Ship-mounted power plant is country’s most expensive

Ship-mounted power plant is country’s most expensive

LAHORE: The 230MW ship-mounted power plant, which will be pressed into service on Sunday (today), is by far the most expensive in the country, costing Rs15.66 per unit.

According to records of Pakistan Electric Power Company (Pepco), the Karkey Karadeniz Electrik Uretim of Turkey was allowed the high tariff of 5.98 cents per unit in May of 2009. If current furnace oil price (Rs60,000 per ton) is factored in, the price will rise to a whopping 18 cents per unit.
At the current rupee-dollar exchange rate this price comes to Rs15.66 per unit against current average price of Rs9.37 per unit.

According to Pepco calculations, the plant will single-handedly increase the overall tariff by a staggering four per cent if the cost is to be passed on to consumers.
The plant, with 93 per cent availability for the next five years, was recruited by Private Power Infrastructure Board (PPIB) in the beginning of 2009, and was given Rs6 billion ($80 million) as advance payment on May 12, 2009.

Initially it was supposed to come on line in September 2009, but missed the deadline. Its commercial operation date (COD) was extended twice, and should have been operational in May 2010.
Even if it starts production next month, the plant will be operational seven months behind schedule. The Pepco, the buyer in this case, has put the management on notice for the delay.
According to the Rental Service Agreements, the Pepco can “cash in” the performance guarantees if commissioning of a plant gets delayed by a month.

Every plant is given a “grace period” of two to three months, after which the Pepco may renegotiate the entire RSA, including tariff, or can reduce the rental period correspondingly.
So, it’s a God-sent opportunity for the country to renegotiate the deal and get the tariff reduced,” a Pepco official said. The opportunity had risen because of Karkey’s fault and the ministry of water and power and Pepco must avail it, he insisted.

When asked to comment, a spokesman for Pepco said: “We appreciate the Turkish cooperation in this hour of need. All the matters will be solved in accordance with the terms of the contract.”

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