CEB sets record straight on Adani 500 MW wind power project

Thursday, 30 June 2022 02:31 -     - {{hitsCtrl.values.hits}}

With reference to the Daily FT article titled “Strom over Govt. offering Adani 500 MW wind power project ignoring local developers” published on 3 June, the Ceylon Electricity Board has sent the following clarification.

Pursuant to the policy decision of the Government to meet the 70% of the national electrical energy demand of the country from renewable energy resources, Mannar and Pooneryn areas has been declared by the Sri Lanka Sustainable Energy Authority as “the renewable energy development area” under Section 12 of the Sustainable Energy Authority Act No. 35 of 2007, and opened for private sector investment since 2013.

But no tangible effort has been made by the Ceylon Electricity Board (CEB) nor Sri Lanka Sustainable Energy Authority (SEA) to attract prospective potential Investors to generate electrical energy from the renewable energy resources available on or below the surface of the land or the air space of the land of those declared areas.

In the meantime, a proposal from the Adhani Green Energy Ltd. (AGEL) on the request and recommendation of the Government of India has been considered by the Government, and has granted the policy clearance of the Government for the Board of investment (BOI) to proceed with the signing of a Memorandum of Understanding (MoU) with AGEL (signed on 11 March 2022). 

This MoU was signed on behalf of the, Ministry of Finance (MF), Ministry of Power (MP), Ceylon Electricity Board (CEB), Sri Lanka Sustainable Energy Authority (SEA) and Board of Investment of Sri Lanka. This MoU deals with the macro issues and has not offered 500 MW of wind power in Mannar and Poonaryn areas to the said company at US cents 7.55 per unit of electricity as claimed in your report. This MoU also lists the responsibilities of each Governmental party.

Under the aforesaid MoU, AGEL will conduct at its own cost a detailed feasibility study on the proposed project complying with existing laws of Sri Lanka, and submit the feasibility study report to the other parties for review and for acceptance. 

Specifically, if the feasibility study report is acceptable to the other parties, and if it is feasible for the CEB and SEA to proceed with the proposed development, AGLI, is required to finalise technical parameters, project location, etc., in consultation with CEB, SLSEA and BOI and obtain the Provisional Approval and Energy Permit for the project under the provisions of the Sri Lanka Sustainable Energy Act No. 35 of 2007.

Upon receipt of the energy permit from the SEA, tinder Section 18 of the SEA Act No. 35 of 2007, CEB is in a duty to invite detailed technical, commercial and finance proposals from the AGEL through a Request for Proposal (RFP) and upon receipt of such proposals it is the duty and responsibility of the CEB to evaluate such proposals and negotiate the selling price of the electrical energy to the CEB in accordance with the least cost principle outlined under Section 17 and Section 43 of the Sri Lanka Electricity Act No. 2 of 2009 and make recommendation to the Public Utilities Commission of Sri Lanka (PCCSL) to satisfy that the AGEL is capable of selling electrical energy to the CEB at least cost and meets technical parameters of the transmission network of the CEB as required under Section 43(6) and 43(7) of the said Electricity Act.

In addition, AGEL is required to submit an application to the Public Utilities Commission of Sri Lanka (PUCSL) to obtain a generation licence as a prerequisite to signing the power purchase agreement (PPA) with the CEB.

The total investment of the project is estimated at $ 500 million, which includes 30% equity Investment and 70% debt financing raised from the international market. Local entrepreneurs can make proposals under Section 16, 17 and 18 of the said SEA Act No. 35 of 2007 for similar renewable energy projects recognised and identified by the SEA under Section 12 of the said SEA Act, provided that they must be capable to raise capital funds requirement from the international financial market, especially given Sri Lanka’s current credit status as mostly 70% of capital funds required for importation of equipment and other machinery.

Further, the rupee tariff received in response to the Expressions of Interest (EOI) called by the State Ministry of Solar, Wind and Hydropower Generation Project Development in November 2021 had been based on the dollar rate prevailing at the time. 

However, allowing the foreign investors to earn their revenue and repatriation of their profits is governed by the BOI law and the Foreign Exchange Management Act and not under the said two Acts of the Sri Lanka Electricity and SEA Act.

At present, CEB is moving towards the development of ground mounted solar project in Sampur area, Trincomalee on a land in extent of 500 acres, with an investor of India without resorting for competitive bidding process to select an investor with no objections from any so-called aggrieved parties within the CEB nor outside the CEB for which the said Joint Venture Agreement (JVA) signed by the CEB, on the same date at the same premises and in the presence of same dignitaries along with the signing of MoU with AGEL.