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 Post subject: Delay in Upper Kotmale, Norochcholai is a disaster
 Post Posted: Mon Apr 11, 2005 2:44 am 
Delay in Upper Kotmale, Norochcholai is a disaster - Small power sector

DM / 11APR2005

The Grid Connected Small Power Developers Association (GCSPDA) yesterday described the delay in Upper Kotmale and Norochcholai on the part of the Government tantamount to inviting disaster.

The GCSPDA Chairman Dr. Nishantha Nanayakkara said that in 2004, Sri Lanka used 7,000 million units of electricity. Last year, only 3,000 million units were generated from hydropower sources, while the balance of the requirement was met by thermal power plants (mainly diesel), owned by either CEB or private producers.

"According to the CEB, the demand for electricity increases by 8% per annum. Thus, 600 million units must be added every year, which means that by 2010, Sri Lanka's estimated annual electricity consumption would increase to 10,000 million units. To supply the additional 3,000 units required by 2010, Sri Lanka needs another 500 MW of plant capacity," Mr. Nanayakkara said.

He said that currently, there is a shortage of generation capacity. CEB needs another 300 MW of low cost power to meet even the present demand. With the projected annual increase of 8%, this shortage will worsen year by year.

"We accept that only hydro and coal power plants can generate electricity at a low cost. In spite of this, the construction of low cost Upper Kotmale and Norochchalai plants are getting delayed day by day," Mr. Nanayakkara lamented.

According to him, to ease the financial crisis faced by CEB and to lessen the burden carried by the Treasury on behalf of CEB and to provide relief to consumers plagued by high electricity costs, the only immediate solution is to expedite the development of 300 MW of small hydro power projects (of capacities less than 10 MW) as proposed in this year's budget and develop the Upper Kotmale and Norochchalai power plants without further delay. "Delaying the implementation of these projects is tantamount to the Government and CEB inviting disaster on the country," he said.

He also said that the only way to temporarily avert the impending disaster caused by delaying the Upper Kotmale and Norochchalai power plants was to immediately commence constructing the proposed combined cycle power plant at Kerawalapitiya as planned. Though the cost of a unit of electricity generated by this plant is said to be over Rupees 10, it is well below the cost of purchasing thermal power from private power producers.

It is prudent, therefore, to implement the Kerawalapitiya project immediately, Mr. Nanayakkara said.

Though the Government has promised to encourage the development of hydro resources of capacities between 10 to 50 MW, on the basis of a public-private partnership, a policy and action plan for this purpose is yet to be established. “If the Government now takes the necessary steps to uphold their promise, we estimate that at least 250 MW can be added to the national grid within the next four years,” the GCSPDA chief said

 Post subject:
 Post Posted: Tue Apr 12, 2005 3:16 am 
Coal power fired by ministerial tug-of-war

By Munza Mushtaq
DM 12APR2005

Sri Lanka's controversial coal power project faced more hurdles yesterday following a tug-of-war between two powerful Ministers, with one in favour of China and the other of India.

CEB Engineers Union sources said Power and Energy Minister Susil Premajayantha was trying to push the Chinese deal through while Finance Minister Sarath Amunugama was trying to push for the Indian deal.

Two very high-powered Chinese officials are currently in Colombo regarding the construction of the coal power plant. "These two Chinese officials also visited the Finance Ministry but they were cold-shouldered by the Minister," the sources said.

According to the proposal, the Chinese Government will provide a soft loan to a Chinese company (the company will be a 100% Chinese Government-owned corporation) to construct the coal plant. After completion the plant will be handed over to the Government. But the sources stressed that the contract was open for negotiations.

The two Chinese officials in Colombo represent the China National Machinery and Equipment Import Export Corporation, a 100% Chinese Government-owned company. They are scheduled to leave Sri Lanka today. However if the Government fails to sign a letter of commitment with the Chinese officials before their departure, the Chinese deal would likely be off and Sri Lanka will have no choice but to go in for the Indian proposal.

Ceylon Electricity Board General Manager, Ranjith Fonseka claimed he was not aware of the issue between the two Ministers but emphasized that Sri Lanka had been talking of a coal fired power plant for the last 16 years. "We need a coal powered plant as soon as possible," he said.

 Post subject: Energy crisis - Lanka Govt warns about banks' crashing
 Post Posted: Sat May 07, 2005 1:53 pm 
Lanka Govt warns about banks' crashing

CEB owe SL Rs 90 billion ($ 914.6 million) to Peoples' Bank alone
Rs 40 billion loss for CEB in 2004

PK Balachandran
Colombo, May 6, 2005|19:05 IST
@ Hindustan Times

Facing stiff opposition to its plans to restructure the terminally-ill state-run Ceylon Electricity Board (CEB), the Sri Lankan Government has indirectly warned that the country's two main public sector banks will crash and the whole economy will go down, if the restructuring is not done immediately.

The warning came in a front page report in the state-owned Daily News on Friday quoting "top" sources.

The report said that the CEB had recorded a loss of SL Rs 39.3 billion ($ 396.3 million) in 2004 and owed SL Rs 90 billion ($ 914.6 million) to the state-owned Peoples' Bank alone.

"With the Peoples' Bank and the Bank of Ceylon (both state-owned) controlling nearly 60% of the banking sector, it is a frightening scenario," the paper said.

"When the CEB crashes, it is likely to take the banks along with it, virtually bringing the whole economy down," it added.

"The weakening financial conditions of the CEB and the Ceylon Petroleum Corporation (CPC) would drive them to virtual insolvency with an accumulation of debt obligations to the banking sector," said Sri Lanka's apex bank, the Central Bank, in its report for 2004.

The bank called for immediate restructuring and scaling down of systems losses.

According to Daily News experts believe that the CEB is one of the most inefficient public sector enterprises in the world, with transmission losses amounting to 20 per cent. It is over-staffed and sells electricity at very high rates compared to other countries, the paper said.

Opposition from trade unions

The CEB's trade unions, supported by the Janatha Vimukthi Peramuna (JVP), a Sinhala-nationalist not allowed Marxist party, which is a key element in Sri Lanka's coalition Government, are fighting the restructuring plan tooth and nail.

Sources in CEB told Hindustan Times that the Government's proposal to divide the CEB into nine companies, although Government-owned, is but a ploy to sell them off to private parties eventually, as private investors will find these small companies affordable.

But the Government vehemently denies this, and says that it will introduce in parliament a bill to ban privatisation, except through a motion in parliament backed by a two-thirds majority.

However, the CEB unions and JVP are not convinced. On Thursday, the JVP walked out of a cabinet meeting discussing this issue. If the JVP carries out its threat to walk out of the ruling coalition, the United Peoples' Freedom Alliance (UPFA) Government will collapse. It is critically dependent on the JVP's 39 MPs.

Opposition to new power plants

The power crisis in Sri Lanka has worsened with stiff opposition to the Upper Kotmale hydro-electric project from the Ceylon Workers' Congress (CWC) which fears that thousands of Indian-origin Tamil tea estate workers will be displaced by it. Environmentalists also oppose the project.

Likewise, the Norochcholai coal fired power project is opposed by locals, especially minority groups like the Catholic and Muslims. They fear displacement and pollution.

The opposition United National Party (UNP) has been in favour of the restructuring of the CEB and setting up the hydel plant in Upper Kotmale. But it has been opposing the Norochcholai plant given the opposition to it from the locals. The UNP is dependent on the votes of the minorities like the Catholics and Muslims. It had jettisoned the project when it was in power between December 2001 and April 2004. As to what the present UPFA Government would eventually do, is to be seen.

The Norochcholai project for three 300 MW plants is also caught up in governmental indecision on whether the foreign party to do it should be Indian or Chinese.

A cabinet decision taken in February to give to the Indian National Thermal Power Corporation (NTPC), was inexplicably overturned in the aftermath of the Chinese Prime Minister's visit to Sri Lanka recently. The Minister of Power, Susil Pramajayanth, said that the project would be executed by a Chinese company on a build and transfer basis. The NTPC, on the other hand, was to build, operate and own it.

Subsequently, after the visit of the Indian Foreign Secretary, Shaym Saran, the Sri Lankan Government decided to ask the NTPC to submit fresh proposals.

"As of today, the Norochocholai project is with us. But we cannot guarantee that it will be with us tomorrow. We'll keep our fingers crossed," an Indian official told Hindustan Times.

Ceylon Petroleum Corporation

The other white elephant being maintained by the Sri Lankan Government against all odds, is the Ceylon Petroleum Corporation (CPC). The previous UNP Government had introduced a plan to divide it into three and sell two thirds to foreign parties.

The Indian Oil Corporation (IOC) took a third, albeit under heavy opposition from the trade unions and even the management of the CPC.

But come change in Government in April 2004, it became impossible to give a further third to another foreign company.

When the Chinese company, Sinopec, withdrew, India' Bharat Petroleum Corporation (BP) was the only contender left. But this gave birth to another issue - an Indian monopoly over the country's oil sector. How can another country hold two thirds of Sri Lanka's sector? Sri Lankan nationalists asked.

But the CPC has been desperately in need of money. According to Daily News the rising price of oil in the world market and the low selling price of fuel in Sri Lanka had led to the CPC losing SL Rs 14.5 billion (US$ 142 million) in 2004. In the first four months of 2005, it lost SL Rs 5.5 billion (US$ 56 million).

The Government had pumped in SL Rs 8 billion (US$ 81.3 million) to mitigate the burden on the CPC. But the Government would also have to arrange to pay US$ 46 million to the Indian Oil Corporation as compensation.

In the absence of a reasonable retail fuel price the IOC cannot run its business in Sri Lanka.

"We may have to wind up as we are not running a charity," said an IOC official, though he felt that the Government would certainly pay up.

The Bharat Petroleum's coming in as the third player in the CPC's restructuring should bring in US$ 85 million. But BPC's coming is very doubtful now because of stiff opposition from Sri Lankan nationalists, the trade unions and the JVP. Additionally, the Government's assurance that a stringent law barring privatisation will be passed, makes the possibility of the BPC's entry quite remote.

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