Losses from low-grade coal cost CEB Rs. 2.8 b

Monday, 16 February 2026 03:23 - - {{hitsCtrl.values.hits}}

Recoverable penalties estimated at only Rs. 1 b

Maintenance exposure of around Rs. 250 m flagged but excluded from loss calculation

The Ceylon Electricity Board (CEB) has estimated direct losses of Rs. 2,796 million from four coal shipments supplied to the Lakvijaya Power Plant, with only Rs. 1,037 million identified as recoverable from the supplier, according to submissions made to the Sectoral Oversight Committee on Infrastructure and Strategic Development.

According to documents seen by the Daily FT, the losses were calculated based on the energy shortfall caused by lower-grade coal and the cost of dispatching substitute power from the Kerawalapitiya Combined Cycle Power Plant at Rs. 37.53 per kilowatt hour (kWh).

The CEB submission shows that the estimated direct loss from Shipment 1 amounted to Rs. 595.1 million, followed by Rs. 288.5 million from Shipment 2, Rs. 1,047.4 million from Shipment 3, and Rs. 865 million from Shipment 4. The total direct impact amounts to Rs. 2.796 billion, with Shipment 3 accounting for the largest single exposure at over Rs. 1 billion.

The CEB has separately quantified amounts recoverable from the supplier as penalties under contractual provisions: Shipment 1 at Rs. 644.5 million; Shipment 2 at Rs. 135.1 million; Shipment 3 at Rs. 150.3 million; and Shipment 4 at Rs. 107.1 million. The aggregate recoverable amount of Rs. 1,037 million would reduce the net exposure to approximately Rs. 1,759 million, subject to enforcement and recovery.

Notably, the recoverable sum for Shipment 1 exceeds the estimated direct loss for that consignment, indicating that penalty calculations may extend beyond the substitution cost methodology.

The submission also flags operational stress linked to the use of low-grade coal, including air pre-heater blockages, boiler tube erosion, and turbine blade strain. Estimated maintenance costs include Rs. 50 million for air pre-heater cleaning, Rs. 10 million minimum for boiler tube repairs, and Rs. 100 million for turbine stage blade repairs. The CEB notes that outage-related generation losses are not included in these figures.

The Committee has sought comparative performance data, including reverse calorific value calculations, coal consumption per kWh, and coal required per hour to generate 300 MW, comparing the current supplier against previous consignments.

The issue is expected to come under further scrutiny at the upcoming Committee meeting as lawmakers examine procurement safeguards, quality verification mechanisms, and the financial impact on the power utility.

The coal supplied to the Lakvijaya Power Plant has been found to be below a Calorific Value of 5,900 kcal/kg on an air-dried basis under CEB specifications and considered off-spec, requiring higher coal consumption per unit of electricity generated, reducing boiler efficiency, increasing auxiliary power use and ash handling loads, and ultimately raising the cost of generation.