ISLAMABAD: The Asian Development Bank has conveyed to Pakistan its serious concerns over slow progress on a $1.2 billion project for rehabilitation of generation companies (Gencos) of Wapda, putting a question mark on the government’s efforts to facilitate inflow of about $2 billion into the economy.
The ADB has been engaged with the authorities for quite some time to accelerate disbursements for power sector reforms, including resolution of the circular debt. And the finance ministry said last week it was expecting $2 billion loans from the ADB and the World Bank during the current financial year to support its balance of payments position despite an unsuccessful conclusion of a financing facility from the International Monetary Fund without disbursement of $3.6 billion.
An ADB mission visited Islamabad in the last week of September to push forward the Genco project whereby “one or two old plants are to be replaced with new and more efficient combined cycle gas-fired plants”. Co-financed by the French development agency (AFD), the project is funded by the ADB under its Energy Efficiency Multi-tranche Financing Facility.
Sources told Dawn that the mission had detailed discussions with teams of the Wapda and Private Power and Infrastructure Board (PPIB) to ensure that operation and maintenance contract initiatives did not overlap with the ADB project that involved rehabilitation of plants in Multan and Faisalabad.
“We continued to find it difficult to advance this project despite it being a government priority,” Steven Baillie, Principal Energy Specialist of the ADB, wrote to the ministry of water and power.
The bank sought the intervention of the ministry’s top brass to move the project forward but pointed out that the ADB had provided to the government the results of its feasibility consultant selection process in the first week of August with a recommendation to begin negotiations.
It, however, expressed its frustration over the fact that the government had “still not sent a letter to the leading candidate — Engconsult”. The ADB also sought a clarification “whether this is because of competing priorities, or if there is a more fundamental reason that the government is reluctant to move forward with this project”.
Having lost up to 40 per cent of generation capacity because of mismanagement and old age, the government had agreed with the lending agencies to hand over control of Wapda’s three major generation companies to private firms on management contracts under a performance-based structure of incentives and penalties.
It is for the first time that the government has adopted the concept of awarding management contracts to improve the bleeding public sector corporations — a major departure from previous experiments of outright sale, partial privatisation along with management controls and listing on the stock exchange.
Three major thermal companies in Muzaffargarh, Guddu and Jamshoro, with a combined installed capacity of about 2,800MW can hardly produce 1,700MW and that too at an output efficiency of only 25 per cent. As a result, their tariffs go out of manageable limits.
“Due to poor maintenance of the power stations, Gencos have lost nearly one-third of their capacity and nearly 17 per cent of their thermal efficiency due to plant degradation,” a senior official said, quoting a technical study. Most of the units are capable of running both on gas and oil, but were operating on oil only due to shortage of gas.
The Muzaffargarh station has lost more than 40 per cent of its generation capacity, while the capacities of Jamshoro and Guddu have come down by 32 and 31 per cent, respectively. Some of the units have lost up to 63 per cent of their generation capacity.
Apparently, resolution of problems at these power plants alone can significantly bridge the demand-supply gap, which if synchronised with improvements in the distribution network, can further overcome power shortages.
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