LAHORE: The Punjab government is arranging bank financing for its 1,180MW Re-gasified Liquefied Natural Gas (RLNG) power plant in Bhikki to “spare its own resources committed for the project for other development works in the province”.

Ahad Cheema, chief executive officer (CEO) of the Quaid-i-Azam Thermal Power (QATP), a Punjab government-owned company set up to build power projects in the province, was quite hopeful that “the firm will achieve the financial close of the Bhikki project in next two to three months. The inauguration of the plant by Prime Minister Nawaz Sharif last week without achieving the financial close of the project had spawned speculation that it may have been an attempt on the part of the ruling PML-N to influence voters in the (first phase of) local government elections in Punjab scheduled for Oct 31. “We didn’t wait for the financial close because it is a (provincial) government-funded project. The government has already committed Rs33 billion for the plant from its development budget. We’re negotiating a deal with the banks only to spare this money for diverting these funds to other development works,” Cheema told Dawn on Friday. But this is not the only debate surrounding the $550 million power project. The government’s decision to purchase the so far commercially untested gas turbine technology for the RLNG-based power plant from General Electric or GE, the American original equipment manufacturer (OEM), has also generated a controversy around the project. GE has also won contracts for supplying the same gas turbines it claims to have 61.5pc (fuel) efficiency. The Punjab government is of the view that the Bhikki project has the “lowest EPC (engineering, procurement and construction) cost and highest efficiency, which has set a new benchmark in the power industry”. 

Also read: Yet-to-be-developed gas turbines being acquired for power plant

In a statement sent to Dawn, a Punjab government spokesman said the GE had designed and developed the gas turbine model 9HA.01 selected for the (three provincial and federal) RLNG-based projects three years ago. The QATP chief, Mr Cheema, said the selected gas turbines may not have been in commercial operation yet, but those had been “extensively tested in the harshest site conditions simulated in the $300m lab created by GE. No other OEM --- Mitsubishi and Siemens --- has such a lab and hence are making a noise”. According to the government spokesman the efficiency of ‘F class’ machines is in the range of 55pc while a plant built on ‘H class’ technology has efficiency greater than 61pc. “A power plant using an F Class machine operating at 55pc efficiency would have to spend an extra Rs8bn per year on fuel compared with another plant using a H Class machine operating on 61pc efficiency (at the same fuel cost).” Cheema said it was for the first time in Pakistan’s history that all the three major OEMs had participated in the bidding for supplying equipment for a power plant. “The qualification criterion for the ECP contract was designed to encourage greater participation and competition among the manufacturers. As a consequence of this, the competing OEMs drastically reduced their prices if compared with the high rates they had quoted in the past because of lack of competition.” He claimed that GE had not charged any premium on the machine’s efficiency in its price. He said the ECP contract price of $466,000 per megawatt was lowest ever “because of transparency in the bidding process”.

He insisted that the bidding documents were shared and details discussed with the competing OEMs at a pre- bidding meeting with them.

“No one objected to it. They lost because GE had quoted a desperately low price compared with $500m and $550m quoted by the two other competing OEMs.” The government says the contractor has agreed to provide additional warranty of two years for the turbines and the QATP is entitled to receive liquidated damages (LDs) from the EPC contractor in case the contractor fails to achieve the “guaranteed performance values of output (generation) and fuel efficiency”. “The EPC contractor will have to bear huge losses of $45m for 1pc drop in the guaranteed efficiency,” Cheema concluded. “We are the 11th customer of what you call as unproven technology; France and Japan are among the other buyers of this technology that has actually been developed and shipped to those countries as required by the qualification criterion.” The QATP CEO said the data on the turbines selected for the Bhikki project was acquired through “our local and foreign consultants — Pakistan’s Nespak and German Lahmeyer. “GE was not the only bidder offering technology that is commercially untested. One of the machines with 61pc efficiency value Mitsubishi was selling us is also not in commercial production.”

Published in Dawn, October 24th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play