India’s NTPC begins studies on Trincomalee coal power project

By Bandula Sirimanna

India’s largest power generation company NTPC is now jointly conducting pre-feasibility studies with the Ceylon Electricity Board to set up a 500 MW coal –based thermal power plant near China Bay in Trincomalee.

The soil testing and site selection process is now under way, a senior official of the CEB Project Director’s office told The Sunday Times FT. “The new site is north of Trincomalee while the earlier site was south of it. We have selected the site and it looks okay. We now have to sign the power purchase agreement,” said the senior NTPC executive who did not wish to be identified. The project in Sri Lanka is important for NTPC to globally demonstrate its ability to set up power projects in other countries. The company also plans to set up power plants in Nigeria, which is allocating long-term supplies of liquefied natural gas (LNG) to fuel NTPC’s plants in India

The Trincomalee coal power project is an attempt by India to engage its neighbours both politically and economically; the Indian Navy has access to the Bay of Trincomalee under an accord signed by the two countries. The NTPC plant is expected to significantly enhance power supplies in the island nation. Sri Lanka has a total power-generation capacity of only 2,500MW, against India’s capacity of 130,000MW.

“Sri Lanka is in need of power generation (capacity) as the country’s power supply is inadequate. Being a major power generation player in this part of the world, it is a good thing for NTPC to set up projects outside India,” an Indian diplomatic source told The Sunday Times FT. NTPC’s Sri Lankan project involves an investment of $500 million and is to be set up in a joint venture with the Ceylon Electricity Board. It is expected to be commissioned by 2011. The project will be set up on a build, operate, own and transfer basis and will have a debt-to-equity ratio of 70:30.

It will use around 2.5 million tonnes per annum of imported coal, which is likely to be to be sourced from Australia and Indonesia.