ISSN: 1391 - 0531
Sunday September 16, 2007
Vol. 42 - No 16
Financial Times  

Kerawalapitiya Power Plant - Letter

While the Ministry of Power and Energy and the CEB continue to ignore the 11 questions in The Sunday Times FT of September 2, I am pleased that there is some response (last week) to my concerns by Lakdhavani (Surrogate of Lanka Transformer that is in turn a subsidiary of the CEB). However, I am disappointed that Lakdhavani has not responded to any of the questions that I posed. The concerns I raised in the public interest, can be laid to rest if the CEB/Lanka Transformer/Lakdhavani could produce GE’s written guarantees on the performance and life of the GE Combined Cycle Gas turbines by General Electric (the supplier if the turbines) using HFO. GE’s specifications for CCGTs (GEI 40147H) clearly preclude the use of HFO. Neither the CPC HFO nor any HFO produced in the region met GE specifications and hence if the Lakdhavani CCGT is constructed, expensive ADF (automotive diesel fuel) will have to be used, for continuous base-load operation.

The assertion by the engineer responding on behalf of Lakdhavani, that he has personally operated a 1,000MW Frame 9 combined cycle power plant on HFO in China and that the Chinese power plant, has been in operation for 20 years, poses major creditability issues. Based on his assertion the start date of the plant is September 1987, based on GE’s press release of September 2007 on the Baglan Bay. The CCGT power plant in South Wales, the first ever GE Frame 9 GT power plant was commissioned only in October 2005. Hence the Chinese plant has to be in operation 18 years before GE commissioned the first ever frame 9 CCGT! Very strange, indeed.

GE maintains an updated list of all GTs sold and in operation worldwide. This list is readily available in the worldwide web. GE does not list any GE 1,000 MW CCGT power plant in Shenzhen, China that use HFO.

Lakdhavani says that CEB is not taking any risk. But consider the following. Out of the project cost of $290 million, $70 million constitute equity and $220 million debt. Of the $70 million equity, $50 million are from the Employees Provident Fund, the Employees Trust Fund and the National Savings Bank; only $20 million is purported to be from Lakdhavani. Except Lakdhavani’s $20 million, the repayment and return on the other funds are guaranteed by the Treasury. The balance $220 million is a loan from HSBC also guaranteed by the Treasury repayable over 10 years at an interest rate of 8 percent.

Except for the $20 million the rest of the investment is guaranteed by the Treasury. If HFO cannot be used, which it surely cannot, the losses have to be made good by the Treasury and ultimately the consumers. The question that begs an answer is why Lakdhavani should seek Treasury guarantees, if it could afford to pay any of the additional costs for ADF which could be as much as Rs 16,100 million an year for 20 years.

I pose the question again, has GE guaranteed in writing the performance of the Combined Cycle Gas Turbines on Heavy Fuel Oil? Are there are guarantees and on what HFO specifications are these guaranteed? Leaving aside the questionable ‘ghost’ Shenzhen 1,000 MW power plant, Lakdhavani must provide the name of at least half a dozen out of the 300 CCGT power plants, that Lakdhavani claims are said to be in operation using HFO. Could Lakdhavani make these available to the public through this esteemed journal?

While the Ministry and the CEB continue to look the other way, Lakdhavani’s defense citing a non-existent CCGT power plant from China is another example of the misrepresentations that has been a trade mark of this project. If this power plant were to be implemented, it will result in a massive burden to the public and of course benefit a few.

Daham Wimalasena



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