KARACHI, Aug 27 Mystery continues to surround the DHA Cogen Plant, which has rarely remained operational since its inauguration over a year and a half ago, and its operators have preferred to remain silent on the matter, ignoring demands that a high-level probe be instituted.

The Defence Housing Authority and a Singapore-based company, Sacoden, joined hands to form a company called Defence Cogen Limited (DCL). They then set up a seawater desalination and power generation plant at the southern tip of the man-made DHA Phase VIII peninsula at a cost of around $115 million.

Soon after its inauguration in early 2008, however, the plant developed faults and was shut down in September that year. After many issues, it was finally re-commissioned on August 21, 2009, and according to DCL chief Nasim Khan it was currently still in the testing/pre-commissioning mode and would start commercial functioning by the end of August 2009.

Soon after the plant had started operations in 2008, the company changed hands and AEI Asia (Hong Kong), which is a subsidiary of Ashmore Funds (Houston, USA), acquired Sacoden's shares and became the majority shareholder of the company — raising the concerns of the financial institutions who had provided financing for the project — with the DHA's share shrinking still further.

The plant is supposed to generate 94MW, which it would sell to the KESC to distribute in a city plagued by power shortages. It is also to desalinate three million gallons of seawater, make it drinkable and sell it to the Clifton Cantonment Board, so that it could be distributed in areas of the DHA where water is scarce.

Plant rarely active

since Feb 2008

The then president retired Gen Pervez Musharraf inaugurated the plant in February 2008, but soon afterwards it developed faults and rarely operated at capacity and satisfactorily. The plant was eventually closed down in September 2008.

The state-of-the-art facility, as the operators claim it to be, had reportedly developed mechanical faults soon after the inauguration, but rather than feeling embarrassed about the situation, one of DCL's senior officials had even said that he was happy that it developed faults so soon, as it was during the warranty period so the failure would have no financial impact on the company.

Interestingly, the company also did not seem to be too concerned about the length of time the plant remained inoperative, as under business interruption insurance, the DCL's financial losses were being covered.

This feeling was, however, short-lived, as the fault, which was earlier stated to cost about $1.5 million, began to become worse, and a dispute was sparked between the warrantor and the DCL regarding who would pay how much for its removal. This has now reportedly ballooned to about $10 million.

The warrantor's stance is that the initial damage was only to the shaft, and the entire plant should have been shut down. This was, however, not done, and further damage was caused to many other parts of the Cogen plant.

Sources say that it took threats from senior government officials to those in the DCL involved in the repair issues for work to finally begin on the plant's affected parts.

Siemens, the German company which manufactured the DHA power plant, said that it was ready to change the damaged central hollow shaft of the gas turbine, but refused to repair the collateral damage caused to the rest of the plant and asked for the additional costs of repair to be paid.

Defence Secretary retired Lt Gen Syed Ather Ali, during his April 3, 2009, visit to the DHA plant, spoke to the plant's stakeholders, including representatives from banks, the CEO and MD of Siemens (Pakistan), the CEO of DHA Cogen and others, informing them that concern was being expressed in higher circles in Islamabad on the issue. He told them in unequivocal terms that the “Ministry of Defence would initiate actions” which may be detrimental to their operations in Pakistan.

Use of 'sub-standard materials'

Commenting on the DHA Cogen plant, Defence Residents Association chief retired Capt Halim Siddiqui alleges that the equipment and material used was “faulty and of poor quality”, as the rotor blades of the plant rusted, proving that the material used was substandard. He said that he had asked the DCL/DHA many times, without success, to give him the registration number, year of manufacture, and the name of the manufacturer of the equipment so that he could counter-check and find out if a new plant had been installed, as claimed by the company, or was an old one being used, as suspected by others. He suggested a thorough probe into the issue.

Another representative of the DHA's residents, Asad Qazalbash, referring to design faults, said that the water intake system of the plant consists of a two-metre diameter pipeline that was suspended five metres above the seabed when it was installed, but later it was found out that the seabed had silted, probably owing to the landfill and reclamation activities in the vicinity, and the height was reduced to just three metres. This adversely affected operations.

When Dawn approached the DHA representative on the DCL, retired Lt Col Najam Rishi, he said that the plant had been working on a 'test basis' for over a week now and once the company was satisfied and it operated at full capacity it would be announced. He was given a list of queries regarding the plant which he said that he could not answer, adding that he would ask the company and after the answers arrived would provide them to the media. According to him, the DHA believes in acting in a transparent manner.

This exchange occurred a significant period of time ago, and there has since been no word from the DHA or from the retired Lt Col.

This reporter also sent a number of questions to the DCL over a week ago through its official Azam Mahmood and his chief Nasim Khan, who also represents the major shareholder AEI Asia, but no answers have been provided.

Some of the questions which have gone unanswered include who is the owner (percentage-wise) of the plant? What is the pay back time of loan to financial institutions? What is the cost of the faults? Who is paying the cost? When is the plant to finally start active operations? Is the plant machinery second hand? Have the fans, etc in the turbine rusted? Is the water intake pipe at the proper height from the seabed? Why is the seabed level increasing? Does the increase cause any problems to the plant? Why did the original company sell the plant so soon? Why did a bank file a case against the sale? What is the status of the court case? Is the company getting some money (compensation) for the time that the plant remains shut?

When contacted, the DHA's spokesperson declined to comment on the matter.