"The ministry wants Pepco not only to allow the plant to start partial generation, but also start making payment to that." — File Photo

LAHORE: The Pakistan Electric Power Company is under 'intense pressure' from the Ministry of Water and Power to license Reshma Power, a rental power plant (RPP), to start partial generation, strike financial deals with it and arrange oil for it, according to insiders in Pepco.

The ministry has denied Pepco's claim.

The company insiders insist they have been able to resist the pressure so far because a case is being heard by the Supreme Court, but fear they may soon be “pressed into accommodating the struggling rental power plant on all three accounts”.

They say the power plant, prematurely inaugurated by Water and Power Minister Raja Pervaiz Ashraf on Jan 1, has installed only nine generators at the site - against the 24 it needs to have there to achieve the full generation capacity. The RPP took almost 13 months to install these nine generators.

The sources say that under these circumstances it is impossible for Pepco to issue an “illegal partial generation licence known as commercial operation date (COD).”

Yet, they say, Reshma Power has applied for the licence and the ministry is pressurising Pepco to accommodate the plant.

They said that the rental power plant had been given double the amount of agreed advance payment 14 per cent, instead of the contractually obligated seven per cent  on the understanding that it would be on line by the end of last year. But it failed to come on line so far and there was no guarantee when it would achieve its full generation capacity of 201MW.

The ministry wants Pepco not only to allow the plant to start partial generation, but also start making payment to that. In contractual terms, it means ignoring the delay and legalising its operations.

To make matters worse, the ministry also wants Pepco to arrange oil for the plant because its management has neither money nor any arrangement with the Pakistan State Oil for oil supply.

“It is unprecedented and a totally illegal demand on the part of the ministry,” the Pepco sources say.

Recently, the chief executive of Genco-III was called to Pepco and told to finalise the arrangements as requested by the ministry. But saner voices resisted the ministerial demand. Ministry's position

The ministry's behaviour has been precisely the reason why Pepco has not started “renegotiating tariff and rental terms with the plant so far”.

When contacted, a spokesman for the Ministry of Water and Power denied having exerted any pressure on Pepco and said “everything will be settled in the spirit of the contract”.

The plant was delayed and all possibilities would be explored within the contractual obligations, he said, adding: “The ministry and Pepco are reassessing the situation. In fact they are busy with the case in Supreme Court. Once the case is decided, negotiations for tariff and rental terms will start.”

Muzafarul Islam, project manager of Reshma Power, conceded that only nine generators (each with a capacity to generate 11.8MW) were on the site the rest were not even on high seas. But he said that six generators, purchased from China, would be dispatched from there within a week. The rest of machines would arrive in the next four months, he added.

About seeking a licence for partial generation, which is outside the contract, he said: “The ministry had promised it during the last energy summit. The partial COD was neither unprecedented for the rental plants (Techno has already got one) nor for the IPPs. Why Reshma Power is being singled out.

Pepco is receiving energy from the plant since Nov 11, but holding back formal permission, which is unethical. The plant is ready to pay all penalties and meet all contractual obligations.”

Reshma Power  the second most expensive plant after ship-mounted Karkey Elek Trik Uretim of Turkey (5.98 cents per unit) that would be based in Karachi would cost the country 4.97 cents per unit, excluding oil price. According to calculations by independent experts, it will cost around Rs16 per unit if current oil price is factored in.

The plant would raise the electricity tariff by 2.30 per cent throughout the country. The plant was paid $55.26 million (Rs4.576bn) as advance payment in October last year, which it has been using without meeting the contractual deadline.