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Neelum-Jhelum hydropower project: Wapda explains cost escalation

Clarifying the news item titled "Economic corridor still generates controversy" published in daily Business Recorder Lahore, dated 28 February 2015, wherein it was stated that cost of under-construction Neelum-Jhelum hydropower project increased from Rs 80 billion to Rs 280 billion, a spokesperson for Pakistan Water and Power Development Authority has said that right from the beginning, the basic project concept went through many major changes.

He said that initially the Project was designed for 550 MW capacity with a Power House situated at Majhoi. However, subsequently, to optimise the power generation from this Project the Power House was shifted to Chattar Kalas, 21 km west of Muzaffarabad. This change resulted in an additional financial implication.

The Spokesperson said that besides this, there are a number of other reasons due to which the cost of Neelum Jhelum Hydroelectric Project has increased. 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 a 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 an increase in overall cost of the Project.

The spokesperson said 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 concerns requiring design changes which have resulted in increased quantities and additional scope of work with additional financial implication.

The major Design changes which form the major part of this additional cost include: Change in the height and design of dam to increase reservoir capacity to pass Probable Maximum Flood (PMF) without overtopping and eliminate peaking storage in tunnel.

-- Composite concrete- embankment dam to cope with Fault movement.

-- Increase in cross sectional area of headrace tunnel.

-- Concrete Lining of tunnels instead of shotcrete to reduce head loss.

-- Providing steel lining in the tunnel under Jhelum River.

-- Change in design of steel gates of various components due to seismic reasons.

-- Class 70 Bridge on Neelum River and other additional works required for implementation of the Project.

Two Tunnel Boring Machines (TBM's) have been deployed in place of Drill & Blast method for excavation of most critical reach of 11.5 Km of twin tunnels (total length 23 Km) as an acceleration measure. Procurement of three Nos. 4 MW capacity WARTSILA Diesel generators for providing uninterrupted and quality power supply for construction activities.

There was no provision for payment of escalation in the previously approved PC-1 which has a very high financial implication. Due to variation in dollar exchange rate there is also heavy additional financial implication. Additional financial implication due to security arrangements.

The spokesperson said that due to the above mentioned design and other changes the scope and cost of work has increased. However, despite increase in cost, the Project still remains economically and financially viable as Economic Internal Rate of Return is 23.09% and Financial Internal Rate of Return is 14.49 %). As regards the completion of the Project, all efforts are being made to complete the project on time, he added.-PR

Copyright Business Recorder, 2015