Delay In Dhabeji Power Plant

Plunge of rupee delaying Dhabeji power plant

By Jamil Khan | KARACHI

THE massive decline in the value of the rupee during the last few of months has adversely affected the projects of the city government that were to be initiated with foreign direct investment (FDI) as contractors are reluctant to work on previous agreements as they will be a major loss for them.
One such project was the installation of 47.5 MW power generation plant by the American firm, Energy Saving Solutions -USA (ESS). This project has been delayed due to the massive devaluation of the rupee against the dollar. Work on this project was to start six months ago, Daily Times learnt.
The Karachi Water and Sewerage Board (KWSB) had signed an agreement with the American firm to install a power generation plant at Dhabeji Pumping Station to resolve the power disturbances, which have been affecting the supply of water to Karachi. Earlier, the estimated cost of this project was $45 million and it was supposed to be constructed in 18 months on 10 acres within the jurisdiction of Dhabeji Pumping Station.
KWSB Mega Projects Chief Engineer Mushtaq Memon told Daily Times that when the agreement between KWSB and American firm was inked, the dollar was at Rs 57 and has now increased by 20 percent to almost Rs 78.
“Due to the increase in the price of a dollar, the contractors expect a revise in the agreed tariff and it is expected that the designated CEO of ESS-USA in the city will resolve this issue in a few days with the assistance of the city nazim, who is also the chairman of KWSB,” he said.
CE Mushtaq also mentioned that the increase of KESC tariffs by 31 percent has hugely increased the importance of this project, which will provide electricity to KWSB at Dhabeji with no hindrance.
It may also be mentioned that the American firm, with procurement of a contractor from China, EPC, will set up this plant to produce 47.5MW electricity and this project was based on a BOOT (built, own, operate and transfer) basis and after 25 years it will be handed over to KWSB for one rupee.
He further mentioned that the firm responsible for installing this power generation plant has already conducted various studies and tests related to soil, equipment design and structure, as well as a study after conducting an environmental impact assessment (EIA).
After the issuance of the relevant certificates from SEPA (Sindh Environmental Protection Agency), KWSB had announced groundbreaking ceremony of this project twice but they were both cancelled. “First it was announced that on August 14, 2006, the foundation stone for this project will be laid down, but the ceremony was cancelled for unknown reasons and the next date given was April 26 but it was postponed again, as two days before the ceremony, Sindh Minister for Local Government Agha Siraj Durrani had removed City Nazim Mustafa Kamal from the post of KWSB chairman which led to a confrontation between the Sindh and city governments,” sources in KWSB said.
According to the original agreement, the contractor who is to install this power generation plant will supply electricity to KWSB at one rupee less per kilowatt (Rs 4 per KW) for the first 15 years and at Rs 3.75 per KW for the next 10 years, saving Rs 245 million annually.
CE Mushtaq Memon said that after with the 31-percent increase in tariff by KESC, the proposed plan to acquire electricity from the American firm will be affected. He added that KWSB has acquired a bank guarantee for this project besides approving a connection of nine mmcft (million cubic feet) per day from the Sui Southern Gas Company and supply will start from December 2009.
– Published in Daily Times | Sept 26, 2008

~ by jamilkhan on September 26, 2008.

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