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By Chathuri Dissanayake
As the Power Ministry attempts to work out the legality of awarding a second 300MW LNG project sans a tender process, Lakdanavi Ltd. yesterday claimed the move was outside of the regulations stipulated in Sri Lanka’s Electricity Act.
In a rare tell-all media briefing called by the Power, Energy and Business Development Ministry, all stakeholders were invited and were present to discuss grievances and raise issues, with subject Minister Ravi Karunanayake and Deputy Minister Champika Premadasa acting as self-appointed observers.
Taking the opportunity, representatives of Lakdanavi Ltd., a wholly owned subsidiary of LTL Holdings, raised questions over the legality of the Ministry’s decision to award a second project to the company outside the accepted tender process. LTL Holdings is an institution set up under the Companies Act with 63% shares held by the Ceylon Electricity Board.
“Our position is that awarding the project is illegal according to the Electricity Act,” LTL Holdings Deputy Chief Executive Officer Ravindra Pitigalage said, raising concerns over the bankability of the project.
The Cabinet two weeks ago approved a proposal by Power, Energy and Business Development Minister Ravi Karunanayake to award the tender to set up the Build Own Operate and Transfer (BOOT) 300MW LNG plant, which was tendered in 2016, to Consortium of GCL WindForce and RenewGen as per the Procurement Appeal Board (PAB) recommendations, while simultaneously approving the awarding of a project to build a second 300MW LNG plant at the same location to LTL, at the rates quoted by the company for the first tender.
In a two-year-long procurement process, where several Technical Evaluation Committees were appointed to assess the same tender, Lakdanavi Ltd. was recommended to be awarded the contract twice, while GCL was recommended twice. The proposal by Karunanayake followed PAB recommendations, but also recommended that the project for another plant, to be commissioned in 2021, be awarded to Lakdanavi on the rates given for the first tender.
Bidding by Lakdanavi Ltd. has been mired in controversy, as other bidders have raised concerns of conflict of interest due to the role played by Ceylon Electricity Board in the company.
Accusing the Ministry Secretary Dr. B. M. S. Batagoda of being partisan to one party, LTL Holdings Chief Operations Officer Dhammika Nanayakkara accused that the Secretary tried negotiating a settlement with Lakdanavi Ltd. to accept the second project. However Secretary Dr. Batagoda maintained that he was acting within his official capacity, denying allegations of partiality.
In defending their position, the representatives of Lakdanavi Ltd. came near to blows with journalists raising questions on their involvement in the West Coast plant, refusing to give direct answers and prompting Minister Ravi Karunanayake to take the role of a strict disciplinarian, issuing warnings against aggressive behaviour. Denying involvement in the West Coast plant despite LTL Holdings claiming to have built the plant on their website, Nanayakkara insisted that their only involvement was to manage the plant, with no connection to price determination. The 300MW Combined Cycle Power Plant, built to be converted to LNG in two years and selling power to Ceylon Electricity Board (CEB), has one of the highest unit prices.
According to Minister Karunanayake, the attempt by the Ministry to award a second plant to Lakdanavi Ltd. was to retire such high-cost plants which were increasing tariff cost for consumers.
According to the Minister, CEB has incurred total losses of Rs. 480 billion while raking up a loss of Rs. 27 billion in 2018 alone. The estimated loss for 2019 is Rs. 89 billion, he said.
“We have to work around reducing this, we will try and give the consumers at a lower rate by next year if that is possible,” he said.
Defending his decision to award the second project to Lakdanavi Ltd., Karunanayake claimed that the Cabinet has been advised of all issues, where the advice of the Attorney General has been sought to ensure legality of the award.
“We have not hidden anything from anyone, if the AG gives the clearance that the proposal is ok, then what is the issue in it? We will can move ahead. Our intention is to give the power to the consumers as soon as possible,” Karunanayake said.
The Minister however noted that that the dividendance paid by LTL Holdings was not adequate for the investment made by the CEB, adding that a separate investigation will be carried out to sort out the ownership issue around the company of which 63% shares are owned by CEB.
Noting that under the 19th Amendment, even institutions set up under the Companies Act are to be audited by the Auditor General, Karunanayake said that the issues will be sorted out in the future, with due focus being paid to ownership and compliance.
“We will investigate the matter separately and take proper action. We will discuss and sort the issues out through negotiations,” he said.
