US to explore clean energy investments in Sri Lanka

By Cheranka Mendis

Sri Lanka’s high energy cost driven market stands to benefit vastly from exploring the clean and sustainable energy sector, which has just begun to show signs of development.

The renewable energy sector holds a multitude of opportunities for both local and foreign parties to invest in and gain significant value in the coming years.

The Overseas Private Investment Corporation (OPIC), the US Government’s development finance institution, expressed its interest in engaging more in the sector as it is known as the ‘cheapest way to save electricity’.

OPIC Business Development Director Peter Ballinger, who is currently in Sri Lanka to discuss opportunities in the field, in an exclusive interview with the Daily FT noted that there is more financing available to support projects in clean energy than the private sector is aware of.

“There is probably more financing available than the private sector realises. In fact there are probably fewer projects ready to be financed than there is money looking for good projects. I don’t think the message is very well understood,” Ballinger said.

“If you are a Sri Lankan or foreign company with a good track record that understands the sector, and have a well thought-out development plan with all legal agreements in place along with land, equipment, and power purchase agreements, I don’t think you will have a problem financing the deal.”

The majority of the opportunities lie in solar and wind energy efficiency, for which laws are now being propagated by the Government. Even though comparatively Sri Lanka is not as mature as the European market, or even India, scope for development is high, he asserted.

“It is a wide open market and we would like to see good American companies, either as project developers, equipment suppliers, or investors, not miss the opportunities that exist.”

A demand-driven organisation that aims to bring clean energy to developing regions around the world, OPIC has been active in Sri Lanka since 1974 and has provided approximately US$ 100 million in support for US investors in Sri Lanka and joint venture partners to engage in related projects. The most recent project which is also recognised as one of their largest was with a micro finance institution for US$ 3.5 million.

He observed that the clean energy portfolio in Sri Lanka could end up looking very different to that of other countries. “Sri Lanka does not have as much industry as some other countries do. Therefore it will probably be more oriented towards the tourism industry as opposed to other industries. This will result in the portfolio looking very different,” Ballinger expressed.

He added that in countries that have abundant cheap energy, such as some of the Gulf producers of natural gas, the energy efficiency policies are not driven by the prices of energy but rather by the choice of wanting to be green.

He noted that energy efficiency makes more sense in Sri Lanka given the high price of power and the size of the tourism industry. For businesses like tourism, any savings found through energy efficiency goes directly to the bottom line, which could be marked as a profit.

“In a competitive tourism market, tourists are very interested in staying in hotels and facilities that are energy efficient,” he noted.

In addition to having good cuisine, accommodation, and excellent staff, consumers are now inclined to pick places that have less carbon footprint than others. “Companies that recognise going green also support the bottom line not just through energy savings, but also because consumers are looking to spend time in places that are more efficient and have a less impact on the environment.”

Commenting on the role of the Government, Ballinger stated that the Government’s ambitious energy plans, in both wind and solar, allow companies with experience, such as those from the US which have previously engaged in countries including neighbouring Thailand, India, and Pakistan, to invest and promote. “I think the local Government is doing what makes sense – creating an environment that will provide business and investment opportunities for the private sector.”

Sri Lanka has just begun to measure solar and the wind resources which are essential for potential investors and banks before putting in money. “Investors, whether local or foreign joint venture partners, would want to see the numbers. Not only because they want to make money, but also because when they are signing a contract to sell a certain level of power, in order to be able to deliver on the commitment, they need to know what their resources look like.”

Ballinger, who will be meeting various parties during his visit, added that he would like to see OPIC and other US Government financing agencies like the US Export-Import Bank and US Trade Development Agency having a role to play as Sri Lanka moves forward in the clean energy sector.

“Our companies have the expertise and investment experience, not just in US and other countries, but regionally as well. Finding the right local partner who understands the local business scene and the Government policies could make a very powerful team. That is how projects succeed – when you have the right kind of partnership to allow it to move forward.”

Ballinger added: “The Government gets the power they want, investors do good business, shareholders get a decent return and ultimately the consumer whether buying electricity for the residence or an industrial or tourism sector could save.”