Dysfunctional power plants auction flops

ISLAMABAD: The government on Monday received very poor response for three non-functional power plants as only one company, M/s Siddiqsons (Karachi), submitted a bid for JPCL. No company submitted bids for the plants in Muzaffargarh and Faisalabad.
An open bidding was conducted for the disposal of three redundant, old, and defunct power plants, offered on an “as-is, where-is” basis. These plants have a combined generation capacity of 2,362 MW and a reserve price of Rs 26.625 billion. The auction included the 880 MW Jamshoro Thermal Power Station, the 1,350 MW Muzaffargarh Thermal Power Station, and the 132 MW Steam Power Station in Faisalabad.
“We will assess why no bids were submitted for Muzaffargarh and Faisalabad,” said CEO Northern Power Generation Company Limited (NPGCL) Sabeeh Uz Zaman Faruqui
Prospective bidders had raised concerns regarding the applicability of income and sales taxes, as well as the exemption of sales tax on metal scrap under prevailing tax laws.
In questions raised by the bidders before the biding and sought some relaxations. However, NPGCL clarified that the assets being sold are redundant and defunct plants offered on an “as-is, where-is” basis and do not fall under the category of scrap. Therefore, sales tax is to be applied at the standard rate of 18% for registered firms, with an additional 4% for unregistered firms. Furthermore, under current tax laws, a 10% advance income tax will be collected from bidders with active taxpayer status, while non-active taxpayers will be charged double. These tax rates are subject to future revisions as per amendments to the tax laws.
Bidders also requested a reduction in the performance security requirement from 10% to 5% of the total contract price. However, NPGCL management insisted that bidders must adhere to the provisions outlined in the issued bidding documents.
Some participants felt that the reserve prices were too high and asked for details regarding how the prices were determined, including quantities and rates of valuable metals such as copper, aluminum, and carbon steel. NPGCL responded that the reserve prices had been determined by an independent valuator approved by the State Bank of Pakistan. However, valuation details could not be disclosed, as the disposal is being conducted on an “as-is, where-is” basis. Bidders were encouraged to carry out their own assessments before submitting bids.
According to official documents, the bidders proposed that dismantling should be allowed upon payment of the first 30% installment, but removal of materials from the site should be restricted. They also suggested that due to the large sums involved, staggered payments should be facilitated. Specifically, they requested that the reserve prices of key equipment—such as turbines, generators, transformers, motors, and cables—be itemized in the price schedule. The remaining material could be categorized as scrap, with a per-kilogram reserve price listed. This would allow bidders to make advance payments for specific equipment and release materials accordingly, enabling phased payments and material removal, while ensuring full payment is secured in a timely manner.
“We will assess why no bids were submitted for Muzaffargarh and Faisalabad,” said the CEO of NPGCL.
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