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PM ignores AG’s warning, gives approval for LNG power project
Prime Minister Mahinda Rajapaksa, in his capacity as finance minister, presented a new note to Cabinet this week authorising the Ceylon Electricity Board (CEB) to sign up for a liquefied natural gas (LNG)/diesel-fired power plant without reference to the Attorney General (AG).
This is in stark contrast to his earlier stance that the AG and the Chairman of the Public Utilities Commission of Sri Lanka (PUCSL) “must make necessary arrangements to grant the relevant legal clearance and regulatory clearance, respectively” before a letter of intent (LoI) is signed with tender winner Lakdhanavi Ltd for the 300mw combined-cycle dual fuel LNG power plant at Kerawalapitiya.
The CEB Chairman is now cleared to issue the LoI to Lakdhanavi for the build, own, operate and transfer (BOOT) project and to sign the power purchase agreement for a levelised tariff of Rs 14.989 per kilowatt hour (kWh).
The AG had earlier warned that changes to draft project agreements made after bid closure would have “significant cost implications”. These amendments also pose an “additional liability and risk” on the Government and the CEB, he said.
Applicable legal principles do not permit changes to be made later to draft agreements on which basis bidders have already been evaluated and selected.
The revised agreements were examined, too, by an expert committee. It agreed that “several of these changes would lead to material changes in the project agreements”. “Material deviations” pertain to alteration of an instrument that materially changes it so that it no longer reflects the terms that the parties originally intended to serve as the basis of their legal obligation to each other.
Mr. Rajapaksa’s initial observations stated that the respective regulatory agencies must provide required clearances to the project. He also said his Ministry had no objection to the CEB signing the power purchase agreement with Lakdhanavi by accepting changes to project agreements that were “not material in nature” as provided for in procurement guidelines.
There has also been a sudden reversal on this front. It has now been decided to accept the proposed changes agreed by the CEB, reportedly “taking into consideration the requirement for this project to be urgently implemented to avert a possible power crisis in the near future, adversely affecting the economic and business environment of the country”.