Govt. nod for two LNG plants

• Consortium of GCL China Windforce and RenewGen gets approval for Kerawalapitiya 300 MW LNG Plant
• Proposal to commission another 300MW LNG plant using same tender approved by Cabinet
• Lakdanavi Ltd. to be awarded the new LNG plant
• Two 165MW power plants to be replaced with the second LNG plant

By Chathuri Dissanayake

The Government yesterday gave the green light to award the tender to set up two 300MW LNG plants in Kerawalapitiya, highly-placed Cabinet sources told Daily FT.

As per the recommendations of Power and Energy Minister Ravi Karunanayake, a contract will be awarded to Lakdhanavi Ltd. to set up a new 300MW LNG plant, while approving the Procurement Appeals Board (PAB) Recommendation to award the contract to build the Kerawalapitiya 300MW LNG plant, the bidding process of which concluded last year, to the Consortium of GCL China Windforce and RenewGen.

If the contracts are successfully awarded, this would be the first plant to be constructed after the Lakvijaya Coal Plant in Norochcholai was completed almost a decade ago. The Ceylon Electricity Board (CEB) has not been able to commission any new power plants included in their Long Term Generation plants since 2013. Karunanayake proposed to the Cabinet to award the contract to set up the second 300MW LNG plant, scheduled to be commissioned in 2021, to Lakdanavi Ltd., the company which came the lowest in the bidding process for the first LNG plant, but this proposal was rejected by PAB.

A separate bidding process was not carried out for the second plant, while the bidding for the first LNG plant in Kerawalapitiya closed mid-2018 after a two-year process of repeated technical evaluations, which saw six different recommendations being given by different Technical Evaluation Committees (TEC). The decision by the final TEC to award the tender to Lakdanavi Ltd. was then contested by bidders, and the PAB recommended the tender to be awarded to GCL Windforce and RenewGen. The decision was hotly debated by the then-Cabinet, which put the matter on the back-burner until the Courts delivered a decision on the Fundamental Rights Petition filed by a consumer group on the matter.

Karunanayake sought the approval of the Cabinet this week to follow the PAB recommendation to award the tender to GCL Windforce and RenewGen, noting that no Interim Order has been issued by the Courts to hinder the work. Further, the Minister also recommended to run the proposed plants solely on LNG power from the beginning, to reduce costs.

The specification of the tender for the 300MW Kerawalapitiya Power Plant was to operate it for the first two years using diesel, and subsequently shift to LNG. However as per the Minister’s recommendation, the Cabinet gave approval to award the tender, on the condition that the plants are set up and operated using LNG from the beginning, without an initial two years of operating the plant using diesel.

In justifying the award of the second contract to Lakdanavi Ltd., Minister Karunanayake noted that it will be possible to reduce cost by constructing another 300MW LNG power plant as mentioned, instead of the two proposed 165MW combined cycle dual fuel power plants in Kelanitissa, scheduled to be completed in 2023.

Pointing out that the unit electricity cost of the above proposed two power plants in Kelanitissa is Rs. 27, while the unit electricity cost of the Kelanitissa gas turbine power plant is Rs. 40-45, both of which are higher than the cost of LNG, Karunanayake informed Cabinet it would be possible to reduce cost by installing a new LNG power plant instead. However, it is not clear if a contract can be awarded sans a bidding process, as per the existing legal framework governing the electricity sector in Sri Lanka.