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Water and Power Development Authority reviews revised PC-1 for Neelum Jhelum Hydropower Project

Lahore, March 18, 2015 (PPI-OT): A meeting of Pakistan Water and Power Development Authority (WAPDA) was held here at the WAPDA House today. The Authority meeting, which was presided over by Chairman WAPDA Zafar Mahmood, was attended by Member (Water) Muhammad Shoaib Iqbal, Member (Power) Badr-ul-Munir Murtiza and Member (Finance) Anwar-ul-Haq.

While reviewing the revised PC-1 for 969-MW Neelum-Jhelum Hydropower Project before sending it to Ministry for Water and Power, the meeting deliberated upon the factors responsible for cost escalation of the project. It was noted that right from the beginning, the basic project concept went through major changes. Initially the project was designed for 550 MW capacity with Power House situated at Majhoi. However, subsequently, to optimize the power generation from this project the Power House was shifted to Chattar Kalas, 21 km west of Muzaffarabad. This change resulted in additional financial implication.

The meeting further noted the 1st Revised PC-I approved by ECNEC in 2002 for Rs. 84.55 billion was based on 2001 price level. At that time, the work on the project could not start due to lack of upfront funds. The funds were made available in 2007 and contract work was awarded the same year. The amount of awarded contract was Rs. 90.90 Billion and is one of the reasons of increase in overall cost of the project.

It was further discussed that in the aftermath of devastating Earthquake of October 08, 2005, the Project Consultants, as a part of their assignment, reviewed the tender design and undertook additional studies and investigations. The design review identified many areas of concern requiring design changes, which resulted in increased quantities and additional scope of work with substantial financial implication.

The major design changes which form the huge chunk of this additional cost include change in the height and design of dam, composite concrete embankment to cope with Fault movement, increase in cross sectional area of headrace tunnel, concrete lining of tunnels, steel lining in the tunnel under Jhelum River, class 70 bridge on Neelum River and other additional works required for implementation of the project. In addition, two Tunnel Boring Machines (TBM’s) have been deployed for excavation of most critical reach of 11.5 km of twin tunnels (total length 23 Km) as acceleration measure.

Three diesel generators with 4MW capacity each were also procured for uninterrupted power supply. There was no provision for payment of escalation in the previously approved PC-1 which had very high financial implication. Variation in Dollar Exchange Rate and security arrangements also inflicted heavy additional financial burden.

The meeting noted with great concern that revised PC-1 of the project, amounting to Rs. 274 billion, was approved in 2012 with artificially depressed price without giving due consideration to potential harm which could hamper its scheduled completion. In the following table the increase in major component has been brought out which clearly shows that increase in the cost of civil work is of minor nature. The items which have shown increase were intentionally not fully catered for.

The Authority maintained that the cost of works of Neelum-Jhelum Hydropower Project remains the same but the above mentioned factors have necessitated another cost revision of the project. The meeting decided to send a revised PC-1 of Rs. 416 billion to the Ministry of Water and Power for its onward submission to ECNEC for approval. However, despite increase in cost, the project remains economically and financially viable. Its EIRR is now 23.09%.

The Authority, in its meeting, also decided in principle that in future, construction work will not be started on projects if it is found that their PC-1 were prepared with artificially depressed cost levels. It was noted that 1100MW Kohala Hydropower Project (KHPP), a similar project like Neelum-Jhelum, whose feasibility study was completed by WAPDA in 2009, was handed over to private sector.

The construction of project has not started yet. Compared to KHPP, work was started on Neelum-Jhelum Hydropower Project in February 2008. Despite cost escalation caused by design changes and financial constraints, the project is heading towards completion and is expected to be completed by end 2016.

For more information, contact:
Muhammad Abid Rana
Director Public Relations
Water and Power Development Authority (WAPDA)
G-32, WAPDA House, Lahore
Tel: +92-42-99202633
Fax: +92-42-99203144
Cell: +92-333-4458293
Email: mabidrana@gmail.com
Website: www.wapda.gov.pk

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