ISLAMABAD – The federal government announced on Monday that it had inked a 10-year contract with a Chinese firm for operation and maintenance of the Nandipur power project.

According to a statement issued by the water and power ministry, the agreement for a long-term operation and maintenance (O&M) of the 425 MW plant was signed between the Northern Power Generation Company Limi­ted (NPGCL) and the Hydro Electric Power System Engineering Company (HEPSEC) of China.

The agreement is valid for a period of ten years or two major inspections, whichever is later. However, the price factor is kept under wraps. HEPSEC is a subsidiary of Power China Group, and is currently overseeing scores of power projects around the world.

Talking to Dawn News, an official privy to the development expressed that the Chinese bidder had been selected through a process under which bids were opened on April 11 last year and finalised on Aug 6.

He said a total of four companies had participated in the bidding, but two were declared non-responsive. HEPSEC was confirmed the lowest bidder at a total cost of $185 million, followed by $227.2 million offered by TNB Repair and Maintenance of Malaysia.

At this offered rate, the per unit O&M cost works out at about 85 paisa on furnace oil almost 80 per cent higher than the rate allowed by Nepra. The regulator had allowed the O&M cost on furnace oil and gas at 48 and 34 paisa per unit (Kwh).

The per unit O&M tariff was significantly higher than that of about 62 paisa per unit for the 1292MW Hub power plant and about 35 paisa per unit for AES-Lalpir, which were originally signed at 35 and 16 paisa per unit in the late 1990s and has since gone up with indexation.

A power ministry official said the contractor was required to hire at least 25 percent local workforce for on-job training and would be penalised in case of the plant’s efficiency falling below 44 percent, but any higher efficiency gain would directly go to the contractor.

The power ministry said the decision to outsource operation and maintenance of the Nandipur power plant was in pursuance of the recommendations of the regulator and to bring state of the art and efficient practices in power plant management.

The ministry claimed that the plant had been fully operational since its completion in July 2015 and was now running on furnace oil. The plant has been in the media for closures and shutdowns and a subject of Nepra’s criticism.

The ministry said work was under way to run the plant on natural gas for which an 88 km pipeline was being laid.

“The plant’s conversion into gas operation, which is expected to be completed by the end of April 2017, will significantly improve its performance, reduce operating costs, and result in overall improvement” said a statement.

It is relevant to mention that the Mini­stry of Water and Power informed the Public Acco­unts Committee (PAC) in August last year that the Nandipur power project generated 250 instead of the calculated 425 MW of energy.

‘The plant is giving variable electricity production cost; last month it stood at Rs7.25 per unit,’ he said, adding that the plant was producing 250MW, but could generate 425MW if run on full capacity.

The incumbent government faced much criticism for the same power plant due to confusion prevailing over the exact generation capacity and cost of electricity produced. The tariff is still a mystery, raising eyebrows of economic experts.