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CEB engineers pull switch off US company’s bid for Kerawalapitiya
A proposal by the United States-based energy company M/s New Fortress Energy (NFE) to acquire the Government’s shares in West Coast Power (Pvt) Ltd (WCPL), owner of the Kerawalapitiya Yugadhanavi power station, has been shot down by Ceylon Electricity Board (CEB) engineers. “With the surfacing of this proposal by NFE, we see a great danger in successful implementation of the well-structured plan of the deployment of LNG for power generation in Sri Lanka,” warns a letter from the powerful CEB Engineers’ Union (CEBEU) to Power Minister Dullas Alahpperuma.
NFE first entered the scene with another American entity, General Electric (GE), when they forwarded a project proposal through US Ambassador Alaina B Teplitz for a liquid natural gas (LNG) solution to Sri Lanka’s emergency energy requirements.
The Ambassador had met Minister Alahapperuma before the parliamentary election in August 2019 and “expressed the interest of the Government of the United States of America in promoting this project that offers power at US$ 0.099 [Rs 18.29] per kilowatt hour…for a period of five (5) years”.
That proposal has now evolved with NFE writing to the Treasury Secretary early last month with an offer to invest in about 27 percent of shares of WCPL, subject to agreement on the price. “NFE is also willing to acquire a higher percentage of shares of WCPL, if such shares are available for purchase,” the letter, seen by the Sunday Times, states.
Since Yugadhanavi–which now runs on oil–is designed and built to operate on LNG, NFE has proposed that it be converted to operate on gas which is cheaper. As the company has access to supplies, NFE can provide LNG to Yugadhanavi within 12 months from the date on which it receives necessary regulatory approvals and rights of way.
NFE has also undertaken to provide a floating storage and regasification unit (FSRU) and to build the related gas pipelines for LNG supply to Yugadhanavi at the company’s cost and expense. The gas will be supplied at a “mutually agreeable price”, the letter states.
“NFE envisions the cost of generation to be approximately USD 9.9 cents/kWh when the plant is running on NFE gas,” it says, adding that it was lower than the levelised tariff quoted by Lakdhanavi Ltd for its planned new 300mw dual-fuel power plant to be constructed at Kerawalapitiya.
But the NFE’s offer comes not long after the CEB called for international proposals for the development of the FRSU at offshore Kerawalapitiya on a build, own and operate basis, along with a compatible mooring system on build, own, operate and transfer basis. It will supply regasified LNG for power plants located in Kerawalapitiya and Colombo. The deadline for submissions is June 18 this year.
The CEBEU maintains that it, along with the Power Ministry, developed the road map and the methodology for the deployment of LNG for power generation through a comprehensive feasibility study. And that one of its recommendations was to adopt international competitive bidding LNG supply and infrastructure.
It was also decided to introduce LNG initially for Colombo-based existing and future power plants including Yugadhanavi, the CEBEU points out. Right now, Sri Lanka only needs one LNG import facility comprising FSRU, other seaside infrastructure and related pipelines, etc, for gas deployment.
The demand forecast of LNG for Colombo-based existing and future power plants has been decided based on the CEB’s long term generation expansion plan, which includes the requirement of LNG for 300MW Yugadhanavi power plant as well, the union insists. It is also learnt that sixteen prospective bidders including an NFE partner have obtained bidding documents for these tenders so far.
If the NFE proposal is entertained, it cautions, the entire process initiated by the Government for LNG power generation “will be completely jeopardized”. The competitive bidding process “will be badly hampered” and the country will be deprived of the opportunity of harnessing the benefit of competitive prices.
The CEBEU urges that the CEB-Ministry’s own roadmap and methodology for LNG deployment be implemented in its entirety to avoid “a huge loss” to the country.