Payment dispute delayed Morupule B � report

Isaac Pinielo | Tuesday February 17, 2015 18:00

 

CNEEC is the Chinese contractor that was engaged to build the power station in a contract worth US$970 million (P8.3 billion). According to the recently released Auditor General’s report, the contractor had charged the corporation P114 million, for “reimbursable expenses” relating to the February 2013 to June 2013 period.

The corporation is said to have disputed this claim as the contractor had agreed in April 2013 not to make claims.

However, the auditors revealed that there was no formal correspondence from BPC to the contractor rejecting the claim. The corporation is understood to have only written a letter rejecting the invoice and sent it to the contractor during the audit of the corporation’s financial statements.

BPC management stated that the dispute had been premised on the fact that the contractor was initially contracted to carry out both construction work; operations and maintenance activities, adding that some of the costs claimed related to commissioning activities which had to be borne by the contractor.

It was noted that implementation of the project was delayed and that the Engineering, Procurement and Construction (EPC) contract allowed the corporation to charge the contractor penalties for breach of contract, and vice versa.

“The contractor had submitted claims relating to events which had not been justified or quantified and for which the corporation believed that the counter claims by the contractor, if successful, would not exceed its claims against the contractor,” said the report.

Even as the Chinese demand their millions, BPC is unfazed and says its own claims against the former contractor will eclipse the demands. The power station was originally to be completed by October 2012. However, up to date, it has and continues to be plagued by technical faults that have included boiler failures, blockages and leakages while non-compliance with safety standards resulted in three fatalities in 2012.

Officials also claimed that the company was actually losing money due to the delays in the power station’s completion and would complete the project at a financial deficit.

“The project has been delayed for over 18 months now and we have incurred out of budget costs of over P20 million a month,” one official said in April.

When presenting the 2015/16 budget proposal, the Minister of Finance and Development Planning, Kenneth Matambo said the BPC continued to experience operational and financial challenges.

“BPC recorded a net loss of P1.3 billion in 2013, compared to a net loss of P1.1 billion in 2012, due to increase in generation, transmission and distribution expenses.

“A large part of direct costs were incurred in procuring power from external sources, part of which was subsidised by government through an emergency power grant,” he said.