Energy sector experts are questioning the recent move by the Ceylon Electricity Board (CEB) in purchasing a 15-year old 60MW mounted power plant for Rs. 641 million or 571 million yen.
The 60MW Barge Mounted Power Plant (BMPP) was owned by Colombo Power Private Limited (CPPL) which had a Power Purchase Agreement (PPA) with CEB since June, 1, 2000. CPPL, an Independent Power Producer (IPP) was established in 1998 as a BOI company by two Japanese entities, Mitsui Engineering & Shipping Co. Ltd. (MES) and Kawasho Corporation on a 50/50 basis. MES is one of the successful heavy industry companies and Kawasho is one of the major trading companies in Japan. The project was financed by the Japan Bank of International Cooperation (JBIC) and some other commercial banks. MES was the main EPC contractor.
Officials told The Sunday Leader that they were puzzled at the CEB’s decision after the two Japanese companies made a proposal to continue for another five years after the agreement came to an end last year. The Japanese companies urged that they would hand it over free of charge once the five-year period is completed.
The other factor to consider is that if the CEB had any idea of purchasing a plant they should have made proposals in 2014 in keeping with the generation plan. Thus, the purchase now would not come under the generation plan and the country’s energy sector regulating body, the Public Utilities Commission of Sri Lanka (PUCSL) has not endorsed any such agreement.
Newly appointed Power and Renewable Energy Minister Ranjith Siyambalapitiya said he had given the CEB a four month time period for an energy plan. When the Minister issued the orders, neither the Colombo barge nor the CEB barge were added to the generation plan which is improper according to the Utilities Act.
Sri Lanka Electricity Act, No. 20 of 2009, Chapter V on New Generation Plant and Overhead Lines says (1) Subject to section 8, no person shall operate or provide any new generation plant or extend any existing generation plant, except as authorised by the Commission under this section.
However, when contacted, CEB Chariman Anura Wijayapala told The Sunday Leader that the due process was followed and that under the PPA they had a provision to purchase the plant. He said the plant is running at full capacity. When asked whether they had received the greenlight from the Commission, he said they would have received permission to operate it.
He also said the plant would be of paramount importance to strengthen the Hambantota Port and plans are underway to strengthen the supply there.
However, a CEB committee appointed for a feasibility study and recommendations, stated that considering the age of the plant, an independent consultation report on the hull condition needs to be obtained before taking a decision on the acquiring option of the plant, since the hull repairs, hull painting and dry dock services are very expensive in consideration with the acquiring price.The Committee also said, “Even in the case of the CEB acquiring and operating the plant, consideration should be made on cost involvement of disposal of the plant at the end of life time and reclamation of port premises for handing over. In such case the option of selling the scrap value of the remaining plant for steel can be considered. The net weight of the Barge is 6200 tonnes. Nearly 65 percent is expected to be steel. Therefore effective steel weight would be 4000 ton. The cost of steel can be averaged as USD 445.43/ton.”
The agreement on purchasing of electricity from the power plant expired on June 30, 2015.
It is understood the proposal to purchase the plant was made by former Power and Energy Minister Patali Champika Ranawaka and the cabinet of ministers had given its approval to go ahead.
The plant had been run for 110,000 hours but it had been well-maintained and could be operated upto around 250,000 hours or more.
The powership consists of four 15 MW units, totalling the plant capacity to 16 MW. Although the plant is estimated to generate 420 GWh per annum, the actual average generation is 494 GWh, 74 GWh above initial estimates. The barge was built by Sasebo Heavy Industries, with funding from the Japan Bank for International Cooperation.According to the power purchase agreement, the CEB earlier paid nearly US 6 cents per kilowatt hour (one unit) at present for the power supplied by the barge mounted plant.
When operations commenced in 2000, the Japanese claimed it was a brand new plant. “This is a brand new power plant, assembled for this project,” said Akitsu Odagaki, Chairman and Managing Director of Colombo Power (Pvt) Ltd, a joint venture between Mitsui Engineering and Shipbuilding and Commercial Corporation, both of Japan.
However, some experts question the number of hours utilised, claiming that even if the plant had run 100% they would not have achieved that task. “Unless it was used before, usually it is about 50% or a little more when it comes to usage.”
The barge containing the power plant was permanently moored in the harbour for the duration of the contract.
History of Barge Mounted Power Plant
Sri Lanka’s first ever Barge Mounted Power Plant located at the Colombo Port was commissioned by Minister of Power and Energy Anuruddha Ratwatte in 2000.
The plant connected to the national grid of the CEB supplied 420 GWH of electricity per year, nearly five per cent of the electricity demand of Sri Lanka, during that period.
The Barge Mounted Power Plant was a result of the agreement signed between the Sri Lankan Government and Mitsui Engineering and Shipping Co. Japan in 1998 to develop the 60 MW power plant within the Colombo Port on Build, Own, Operate, (BOO) basis. The power supply company is Colombo Power Private Limited with a share capital of Rs. 1108 million. The barge was connected to Kelanitissa Gas Insulated Sub Station by an underground Super High Voltage Cable.
Speaking at a ceremony at the time the Minister said only 53% of Sri Lankans have access to electricity. “This means that within the next ten years, at least 90% of the population should be able to have the benefit of electricity.” The Minister pointed out that the present hydro power capacity of 1140 MW and thermal power capacity of 470 MW is insufficient to meet the growing annual demand for electricity which is around 9%.
The Minister said that the government’s objective of venturing into a project like this one is two-fold. “One is the government’s duty to fulfil the electricity needs of the citizenry and the other is the necessity to provide basic infrastructure facility to promote both local and foreign investments”.
At the event, former Chairman of the Ceylon Electricity Board (CEB) Arjun Deraniyagala said this decision was taken after the CEB foresaw the dangerous clouds looming in the horizon regarding Sri Lanka power. “It was obvious that the country would face a major power crisis if we did not seek an alternative to hydro power,” he said.
He also said that the Barge Mounted Power Plant was easier to maintain than a land-based power plant. “But the CEB is facing difficulties in meeting expenses with the price of a crude oil barrel increasing by three-fold in the world market,” he said adding that coal power plants were the most affordable and effective for Sri Lanka. “We have plans to establish coal power plants in the near future and till then oil power plants will be put to maximum use,” he said.