450-500 MW Chichoki Mallian power project deal scrapped

Islamabad: The federal government has formally scrapped 450-500 MW thermal power project deal with Qatar Investment Authority (QIA), which was proposed to be set up in Chichoki Mallian (Sheikhupura).

The Economic Coordination Committee of the Cabinet on October 31, 2007 had directed the ministry of water and power to issue a notice to the sponsors of the project, including Alstom-Marubini and QIA to give a deadline within a week as to when they intend to file an application before the National Electric Power Regulatory Authority for tariff fixation and also, by which date would they complete the project to avoid further delay.

The government issued several reminders to QIA to complete procedural formalities but they kept silent. 'You have failed to come up with tariff petition by December 15, 2007 and now we cannot work with you,' the sources quoted one of the concerned ministries as writing to the QIA top officials.

The sources said the QIA has also been conveyed the message that neither the Board of Investment nor the ministry of water and power or Private Power Infrastructure Board would be in a position to hear their viewpoint.

The ECC, in one of its recent meetings, had directed the ministry of water and power to complete public sector projects in time.

The project was being monitored strictly by Prime Minister House all the time when Shaukat Aziz was the chairman, Water and Power Development Authority but the present Water and Power Minister Tariq Hamid does not support the project.

The sources said initially the project was being handled by the Investment Division, which strived to save the deal, but later on it was transferred to the PPIB headed by Yusuf Memon.

They said the project cost, which the QIA has increased from $350 million to $525 million, is being considered as one of the major hurdles in smooth progress.

They said the justification given by QIA on cost overrun and changes in technical specifications were not acceptable to the concerned stakeholders (including Wapda), as the projected tariff would be too high.

Kenneth Shen, head of Strategic & Private Equity, QIA, also briefed a meeting a couple of months ago in the BoI indicating that strong world economic growth had given immense negotiating power to EPC, Alstom-Marubeni.

Though Marubeni was still interested in setting up the project, however, the revised cost was not acceptable to the government. A Marubeni delegation was also expected to meet the caretaker minister for water and power to seek his unconditional support.

The government, however, intends to award Chichoki Mallian project to M/s Dong Feng of China, which would set up 450 MW thermal power project at Nandipur (Gujranwala).

The contract's award to Dong Feng also created a controversy as one of the bidders ie Euro Dynamics International, a Lahore-based firm, has alleged that the second lowest bidder joint venture of Chinese company does not meet the qualification and requirements of a combined cycle plant.

The firm had also accused Wapda of hiding facts from the ECC on increase in price by the JV, besides violating Public Procurement Regulatory Authority's rules.