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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Monday, October 17, 2005

Cheaper natural gas fired power goes waste

Daily Mirror: 15/10/2005" By Nisthar Cassim

US$ 365 m 300 MW project at Kerawalapitiya by Canada-US joint venture stuck allegedly due to CEB inaction

A landmark 300 MW natural gas fired power project proposed by a Canada-US joint venture that could offer cheaper electricity to the masses is stuck allegedly due to lack of serious interest to expedite it on the part of the Ceylon Electricity Board (CEB).

The project mooted by Canada’s BPH International and US Allen Borough Energy envisages an investment of US$ 365 million to build a natural gas fired power plant at Kerawalapitiya on a Build, Own and Operate and Transfer (BOOT) on a 20 year basis.

The power produced by the venture was to cost US$ cents 0.58 (Rs. 5.80) per kWh in the first five years and a lower price of US cents of 0.575 per kWh in the remainder of 15 years. This is considered as cheap compared with high cost fuel sucking thermal generation. For example in May 2005, the thermal unit cost for CEB was Rs. 8.83. The tariff would remain unchanged irrespective of fluctuations in the world market oil prices while there is absolutely no liability on the part of the Government with regard to any expenditure or providing feedstock.

The Liquefied Natural Gas (LNG) was to be used as feedstock to power the two machines and the project was also to be first of its kind.

The developers had also agreed to request from the Sri Lanka Ports Authority to build a separate terminal offshore at Kerawalapitiya at an additional cost of US$ 40 million apart from the initial project cost of US$ 325 million.

The proposal was first mooted to the Government in February this year and received preliminary blessings and approvals from the Ministry of Industrial Development, Investment Promotion as well as the Board of Investment. The Cabinet has also authorized the CEB to evaluate all new power projects which have received BOI approval and report the position to the Cabinet on an urgent basis.

Sources said that it has been over two months since the developers had submitted their proposal and draft Power Purchase Agreement (PPA) to the CEB but it had not even acknowledged their receipt apart from delaying the approval.

“The promoters have put on hold necessary financing and equipment pending finalization of the PPA,” sources added. The undue delay and alleged indifference on the part of CEB has been a frustrating experience for the Canadian and US joint venture.

It was maintained that the saving to CEB from this ground breaking project would be between Rs. Rs. 7.7 billion and Rs. 10 billion per year or Rs. 2.93 and Rs. 3.77 per unit when compared with CEB as well as private sector generated electricity.

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