Gordon Wu, chairman of the Hong Kong-based Consolidated Electric Power Asia (CEPA), has issued a statement denying that the government has terminated agreements to build a 1,320-MW power station at Keti Bandar. CEPA says that it has not received any official communication on the matter, despite an announcement by Water & Power Minister Nisar Ali Khan on 24 June that the project is to be terminated.

CEPA denies that the cost of electricity from the project would be as high as 11 cents per kilowatt hour, as claimed by Khan. Such a costing, CEPA says, is based on an over-estimate of the cost of a 185-kilometre transmission line to deliver the power to the Jamshoro grid station. The government has not yet invited bids for the transmission line, despite an undertaking to do so.

Questions have also been raised as to why the project will not use indigenous coal. CEPA is to part-finance a feasibility study on local coal in a later expansion of the power plant. Under the power purchase agreement signed in 1995, the company will pay a fine of $200 million if the study finds the use of the coal feasible and CEPA still declines to use it.

Sources within CEPA say that they expect to be invited to talks about the project by the government, during which the company hopes to allay the government's reservations. A recent World Bank report on power generation anticipates a shortfall in capacity if the Keti Bandar project does not go ahead. Cancellation of the agreement would also be highly damaging to investor confidence, local observers say.

CEPA has awarded a $1,000 million engineering, procurement and construction contract for the project to Japan's Mitsubishi Heavy Industries and Black & Veatch International of the US (MEED 4:7:97; 13:6:97).