News
Ten days before polls CEB took initiative for huge coal power plant
The Ceylon Electricity Board (CEB) issued a letter of intent (LoI), just 10 days before the Presidential election, to the China Machinery Engineering Corporation (CMEC) to build a 300mw extension to the Lakvijaya Coal Power Plant in Norochcholai.
The Public Utilities Commission of Sri Lanka (PUCSL) was not informed of the LoI despite the regulator’s approval being mandatory. And an extension to Lakvijaya is not in any of the CEB’s Long Term Generation Expansion Plans.
Based on a cabinet paper submitted by then Power and Energy Minister Ravi Karunanayake, it envisages the setting up of a 4th unit at the 900mw plant in Norochcholai using the existing infrastructure and the same or advanced systems and facilities.
The LoI expresses the CEB’s intention to engage CMEC for a detailed feasibility study which is reportedly ongoing. It requires the Chinese firm to assess the technical, commercial and financial viability of the extension, including environmental and other regulatory requirements.
CMEC erected all three of Lakvijaya’s units, including the mishap-ridden first unit which has required multiple repairs since it was commissioned in 2011. It is now shut down for replacement of boiler tubes, for fixes to its faulty FGD (flue-gas desulphurizer) and electrostatic precipitator (ESP), and for routine maintenance.
The ESP is a filtration device that removes fine particles from a flowing gas. The FGD removes sulphur dioxide from the flue gas.
The CEB instructs CMEC to submit the possibility of obtaining a concessionary loan to meet the full project cost on a Government to Government (G-to-G) basis considering that the existing three units were funded by China.
The LoI–which states that it has no legal binding on the utility–is valid for six months during which time CMEC must present a detailed feasibility study report, an outline plan for the construction of the plant and a comprehensive technical and commercial proposal for the extension.
The progress of the project beyond a point depends on the Chinese Government reconfirming CMEC as the nominated EPC (engineering, procurement, construction) contractor for the project, the LoI indicates. Its proposal will go to a technical evaluation committee and Cabinet appointed negotiating committee before any decision is made on implementation.
The LoI’s immediate requirement is the feasibility study which the CEB cannot do on its own, an official source said. “We are not supporting CMEC over others,” he insisted. “That company was the selected contractor for the 400mw LNG (liquefied natural gas) plant in Hambantota and the CEB objected to it. The PUCSL also supported us.”
In 2016, the CEB stopped participating in negotiations and technical discussions on the LNG project, significantly slowing it down. Cabinet still approved its award to CMEC last year but there has been no physical progress.
“The CEB also withdrew our members from committees evaluating other G-to-G projects and managed to stop unsolicited, high-cost proposals,” he said. “But we have been proposing to see whether we can have another unit at Norochcholai since 2017.”
“If a concessionary loan is not forthcoming and there is only a commercial loan we must definitely go for competitive bidding,” the official said. “If we do get a concessionary loan from China, however, it may impose some conditions. For instance, there may have to be competition among Chinese companies and not others.”
The CEB continues to push for coal power plants despite many countries in the world phasing them out in favour of more environment-friendly options. The utility maintains, however, that this is the cheapest option for a market where a large number of consumers are poor.