Sri Lankan Government to review LNG power plant

The government decided yesterday to discuss the Kerawalapitiya LNG plant with Mahinda Amaraweera, the new power, and energy minister, calling for a detailed report on the matter.

Minister Mahinda Amaraweera said that the ministry would decide on the Liquefied Natural Gas (LNG) power plant tender. The decision will follow the submission of a comprehensive report, “Passenger Transport, Power, and Energy.”

The Minister has demanded a document reviewing delays in the LNG power plant project and awarding the tender to a foreign company. However, a decision will be made based on its content.

"We're going to look into whether the tender can be re-issued to a local business," he said. "The lowest bidder was LTL Holdings, a subsidiary of the Ceylon Electricity Board. However, the tender was issued to a Chinese-owned company," explained Amaraweera, adding that the ministry proposed the LNG project in 2016. Meanwhile, the ministry’s scheduled deadline for completion of the project has passed.

The ministry will discuss the report on Thursday. In a statement issued yesterday, the Passenger Transport, Power and Energy Ministry said the country suffered a loss of more than Rs. Ninety billion as a result of this deal.  The statement added that despite a local company offering the lowest bid, the ministry awarded the tender to a Chinese-owned company. Henceforth, in conjunction with the bidding of some officials of the Ministry, the award was compensated.

In February, Cabinet approved the establishment of a 300 MW LNG power plant in Kerawalapitiya by the consortium of GCL China Windforce and RenewGen. It was to be one of two approved LNG power plants through a Cabinet paper presented by Ravi Karunanayake, former Power and Energy Minister.

They were to be the first plant to be built after the completion of the Lakvijaya Coal Plant nearly a decade ago in Norochcholai. Since 2013, the Ceylon Electricity Board (CEB) has been unable to commission any new power plants included in its Long Term plants.

OSL Take: The decision to review the LNG terminal of its own is a positive development in the country’s power and energy sector. Sri Lanka is presently facing a power crisis. The power crisis is likely to get worse by 2020. The Government of Sri Lanka is in the process of looking at ways to mitigate the looming power crisis expected to hit the nation by 2020. Sources say the annual increase in power consumption may be two-fold in the next three years. Therefore, the government decided to expand into this alternative energy generation source will help mitigate Sri Lanka’s energy crisis.

The latest Cabinet approval will allow energy companies that use LNG to generate electricity in other parts of the world.  The former may allow entry into the Sri Lanka energy market and spearhead this new initiative.

It will also allow energy corporations to submit proposals for other innovative and cost-effective methods of generating power as Sri Lanka’s Cabinet appears to be receptive to such progressive recommendations. Therefore, Sri Lanka’s power andenergy sector have many opportunities for foreign businesses/investors toexplore.

VBS/AT/20200106/Z_TB6