KARACHI: No action against Siemens in sight: Old plant at price of new
By Arman Sabir
KARACHI, March 25: A new combined cycle power plant to generate 220 megawatts electricity is being imported for Karachi. Citizens, however, will only benefit in the summer of 2008 and have to bear load-shedding in the fast approaching sizzling hot weather this year.
Well-placed sources warned the citizens to prepare themselves for a worst power crisis this summer and they should not believe in the management’s claims. They said the power utility would not be able to cater to the increasing demand for electricity.
Karachi Electricity Supply Corporation (KESC) officials said a portion of the 220MW plant might begin working in June this year and generate 50MW. The plant will start working in phases.
The power plant, according to the earlier plan, was to be functional by the end of April if the KESC’s Operations and Management Contractor Siemens had acted efficiently.
The sources said Siemens made an agreement with a foreign company to purchase a combined-cycle power plant with an initial capacity of generating electricity of 480 megawatts. Soil testing on the Korangi Thermal Power Plant premises was done to install the plant, which was to be functional by April this year. A KESC board of directors meeting cancelled the deal when it learnt that the combined-cycle power plant being imported was about 20 years old and had been purchased at a price on which a new one was available.
The KESC board of directors did not take any action against Siemens because of the terms of the contract appointing it the operations and management contractor in November 2005. According to the terms, in case the agreement is terminated, the KESC will face huge financial losses.
According to the terms, the agreement may be terminated after two years at any time by either party without assigning any reason. No compensation shall be payable by Siemens to the KESC in the event this agreement is terminated by mutual agreement or for any reason but the termination of this agreement shall not relieve the KESC of any obligation and it will have to pay Siemens. In case the agreement is terminated by the KESC, it shall pay compensation to Siemens for each year of the remaining term of the agreement (i.e. six years).
The KESC is already faced with a financial crunch as it has sold some of the non-strategic shares to an Arabian firm. The power utility owners are entitled under the agreement to sell non-strategic shares one year after taking over the KESC. Selling non-strategic shares shows the private owners intentions that they may sell off the company after three years if they foresee recurring losses and failure to plug leakages.
Under the ‘Share Purchase Agreement’, reached between a consortium of three companies -- KES Power Limited, Hasan Associates (Pvt) Limited, and Premier Mercantile Services (Pvt) Limited – the new buyers of the KESC are entitled to transferring all 73 per cent or part of the shares they owned after three years keeping in view the national security interests of Pakistan (as such interests shall be determined in the sole discretion of the government). The consortium shall deliver 30 days prior notice to the seller (the government) identifying to whom the transfer is proposed to be made.
The same agreement says Siemens Pakistan Engineering Company Limited will be appointed a technical assistant or Operation & Management (O&M) contractor of the utility for a period of not less than three years. Any change or substitution of the said technical assistant or O&M contractor or any amendment to the said contract during the three years period shall require prior written approval of the seller (the government).
As for power generation to meet the demand, the KESC officials claimed that the power generation capacity of the power utility would be increased to 1,500MW next summer as against 1,300MW at present and by obtaining electricity from Wapda and independent power producers, the KESC would have 2,500MW electricity in the next summer which would just about meet the estimated demand.
They said power generation at Bin Qasim Power Station would be increased by 200MW after the maintenance of power generating units, while they were expecting an additional 80MW from the DHA desalination plant, 60MW from KANUPP, and 10 MW from an IPP. However, the sources said otherwise and feared a worst kind of power crisis in the fast approaching summer in the city of 15 million. They said the power generating plant at Bin Qasim and Korangi Thermal Power Station were too old to be used at their optimum level and any such attempts could deal a severe blow to those plants resulting in breakdowns of power generating units.
Besides, the sources said that the availability of 2,500MW power could be a dream in summer as all of the power generating units could not work properly simultaneously. Besides power load-shedding, power breakdowns could not be ruled out that could be of one hour to more than 10 hours as the people of this city experienced during the previous summer. They said the situation might be worse than of the previous year’s.
The KESC officials claimed that they would announce in advance the schedule of power load-shedding, if the KESC was compelled to carry it out. However, they said that breakdowns anywhere in the system could occur at any time, which might take hours to rectify.
