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April 25, 2018

NICL shows inability to arrange reinsurance for two RLNG power plants


April 25, 2018

ISLAMABAD: The commercial operation of the $1.65 billion two RLNG power plants at Haveli Bahadur Shah and Balluki has hit snags as the National Insurance Company Limited (NICL) and Finance Division have shown inability to arrange reinsurance for the operational phase of the 2,460MW project for 30 years on account of substandard work of Chinese companies and the supporting machinery of the power plants.

This was revealed in a meeting convened by the prime minister here on Tuesday on the reinsurance issue of the said two plants, a senior official who attended the meeting told The News.

“On account of power turbines of General Electric (GE) which are never-tested anywhere in the world, substandard supporting machinery arranged by Chinese company and bad track record of the company in Nandipur power plant, the NICL and other companies have opted to stay away from providing reinsurance cover fearing huge loss to them as risk factor has increased manifold,” the official said.

The two plants, the official said, will not be able to produce the electricity on commercial basis unless and until the reinsurance cover is attained. And owing to this very reason, the electricity generation will get delayed more and this will expose the countrymen to huge load shedding in the month of Ramzan.

When contacted, Chief Executive Officer (CEO) of National Power Parks Management Company (NPPMC) Rashid Langhrial confirmed that insurance for the operational period for 30 years could not be attained yet as the NICL has shown its inability to arrange reinsurance cover for the two plants.

Keeping in view the appalling situation about the insurance issue of the two power plants, Prime Minister Shahid Khaqan Abbasi swung into action and chaired a meeting here on Tuesday. The prime minister asked the NPPMC to get the NoC from the NICL and arrange reinsurance from any private company at the earliest.

Officials of the Finance Division were of the view that it was the first prerogative of the NICL as per the Reinsurance Ordinance for arranging the insurance cover for 30 years operational period of the federal government-funded RLNG projects.

However, the NPPMC hired the Pakistan Reinsurance company that works under the Commerce Ministry. Pakistan Reinsurance Company has issued the bids. The NICL, however, has expressed its reservation, keeping in view the power turbines of General Electric (GE) which are never tested anywhere in the world, saying the risk factor of appearing the faults of the machinery has increased and it will not be able to absorb the huge loss if the faults surface after the commercial operation.

To a question, Rashid Langhrial said that unless and until the reinsurance is arranged, the commissioning of date of the two projects will not be declared and the commissioning of the two projects may get delayed for 10-12 more days as the reinsurance attainment has delayed. He said 100 percent insurance cover has already been attained for the construction phase of the projects. However, for operational phase, the reinsurance has not been attained as yet.

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