Management of three generation firms may be given to private companies

Posted on June 16, 2011. Filed under: Wapda / KESC |

Having lost up to 40 per cent of generation capacity because of mismanagement and overage, the government is considering to hand over control of Wapda’s three major generation companies to private firms on management contracts under a performance-based structure of incentives and penalties.

This is perhaps the first time in the country that the concept of management contracts is being introduced to improve bleeding public sector corporations — a major departure from previous experiments of outright sale, partial privatisations along with management controls and listings on the stock exchanges.

Based on a number of technical studies, the authorities have concluded that independent management was perhaps the only option now to resolve management and operational issues and bring about a complete change in the management approach and operational environment of the generation companies.

The three major thermal companies in Muzaffargarh, Guddu and Jamshoro, with a combined installed capacity of about 2,800MW could hardly produce 1,700MW and that too at an output efficiency of as low as 25 per cent. As a result their tariffs go out of manageable limit and hence plants are to be closed for a lot of time.

“Due to poor maintenance of the power stations, Gencos have lost nearly one-third of their capacity and nearly 17 per cent of their thermal efficiency due to plant degradation,” a senior official said, quoting a technical study. Most of the units are capable of running both on gas and oil, but were operating on oil firing due to shortage of gas.

A recent study conducted by Hagler-Bailly Pakistan with foreign assistance found that the Muzaffargarh station had lost more than 40 per cent of its generation capacity, while Jamshoro and Guddu’s capacity had come down by 32 and 31 per cent, respectively.

Some of the units have lost up to 63 per cent of their generation capacity.The management contract proposal comes from this latest study that proposed designing “terms and conditions of operation and maintenance (O&M) contracts in a manner to make the contractor responsible for injecting investments for rehabilitation of the units and bringing in highly-trained and experienced senior managers”.

The report said that based on observations of teams which conducted technical audit of the three companies, interviews with the power stations management and operation staff and review of historic records and capacity and heat rate tests conducted at the operational units, a number of reasons were identified behind the overall decline in performance.It said: “None of the samples complied with Pakistan Standard and Quality Control Authority (PSQA) specifications for residual fuel oil (RFO). High specific gravity values were obtained due to higher water contents”.

The discrete measurement of fuel supplied and energy generated and sent out for each unit of the plant was found to be inadequate.

“No credible measurement system exists for RFO received from the supplier as well as fed to the installed units from the storage facilities of the plant. The same applies to the natural gas,” said the technical audit report.

It said no uniform standards are followed for measurement of energy output.


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