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Unions to short-circuit Electricity Act

Minister John Seneviratne

By Mandana Ismail Abeywickrema

The implementation of the newly passed piece of legislation covering the country's power sector hangs in the balance with trade unions breathing fire and threatening to prevent it from taking effect.

According to the unions, the new piece of legislation is the first step taken by the government towards privatising the country's power sector and is full of ambiguous clauses.

The main aim of the Act as pointed out by the unions and opposition legislators is the government's need to secure millions of dollars from lending agencies to uplift the country's power sector.

Millions of dollars in the form of soft loans, a grant from the Asian Development Bank (ADB) and JBIC to the country's power sector have been in the balance for the past few years due to the government's delay in restructuring the sector.

The government is to get US$ 250 million from the ADB of which 15%-20% would be a grant and the rest a soft loan with a grace period of 10 years.

"The government will now try to get the foreign loans, but the implementation of the Act is an issue by itself," the unions claim.

Breaking the monopoly

The recently passed Electricity Act is aimed at breaking the monopoly of the Ceylon Electricity Board (CEB) over the power sector while providing legal effect to the Public Utilities Commission (PUC) to regulate the sector.

The PUC is also tasked with issuing licences to private companies interested in entering the country's power sector.

According to the new legislation, a foreign or private company would be issued with a licence to enter the country's power sector only if the respective company vested some shares with the Sri Lankan government.

However, the amount of shares the government is to hold in the private companies applying for power generation and distribution licences have not been specified in the legislation. Ironically even the Power and Energy Ministry is unaware of the number of shares the government is to hold in the prospective companies.

Power and Energy Minister John Seneviratne told The Sunday Leader that the number of shares the government would hold in the private companies would be decided on a case by case basis by the Treasury and the respective company.

The government stake in the private companies according to Seneviratne would enable the state to have a hold on the companies.

Shares held by government

Further explaining the percentage of shares the government would hold in the respective private companies that show an interest in entering the power sector, Seneviratne said the percentage would vary according to the scope of the project.

When asked if the government would canvass for a majority stake in order to facilitate the decision making process of these companies, the Minister said that the Treasury would indeed work to secure a significant stake in the companies.

Meanwhile, India is assisting in the development of the core sectors of the power and energy field in Sri Lanka.

Talks have been held between National Thermal Power Corporation (NTPC) of India and CEB on setting up a joint venture for establishing a coal based thermal power plant in Sampur in the east.

The plant is to have a capacity of 300MW and involve an investment of US$ 500 million. The debt-equity ratio would be 70:30 with US$ 75 million being provided in cash by NTPC and an equal amount in kind by CEB.

Agreements under negotiation

The agreements pertaining to the project are currently being negotiated and details on the government's stake in the project are yet unclear.

However, according to Minister Seneviratne, the Sri Lankan government would hold 50% of the shares in the local company NTPC would set up to complete the project.

Power sector trade unions have however scoffed at the government's claim of being able to have a hold on the private companies entering the sector by taking hold of shares in the companies.

Convener, Lanka Viduli Sevaka Sangamaya (LVSS), Ranjan Jayalal says that in reality, the government holding shares in private electricity companies would not give the desired effect. "It would not help reduce the electricity tariffs."

Reducing tariff

He explains that the government has so far been unable to address the issues faced by the country's power sector, especially with regard to reducing tariffs, even with the help of semi private electricity companies.

Citing Lanka Transformers Limited (LTL) and Lanka Electric Company (LECO) as examples, Jayalal said that the government even after holding a large stake in these companies has been unable to prevent the present crisis in the power sector.

"The government has been unable to even address the financial losses incurred in the sector," he said.

According to Jayalal the government 'holding a few shares' in private electricity companies would not bring about any positive development  to the country's power sector.

The issues raised by opposition legislators as well as trade unions have created doubts as to the effectiveness of the legislation, especially the clause stipulating the government's 'involvement' in private electricity companies.


High priced power for the north

The delay in the commissioning of the 35MW Northern Power Plant in Chunnakam has compelled the CEB to purchase power from Agrekko on an emergency basis at a high price to supply power to the north.

Northern Power was one of the companies that expressed its willingness to install a power plant in Chunnakam to provide power to the north. The plant was initially scheduled to be commissioned last year. However, the plant is yet to be commissioned.

The old equipment and the shortage of fuel - furnace oil- to generate power have been attributed as the main reasons for the delay in operating at full capacity.

Managing Director, Northern Power, Jehan Amaratunga told The Sunday Leader that despite the many difficulties in working in the north, Northern Power has invested over US$ 25 million on the project.

Referring to the delay in commissioning the plant, Amaratunga said the company has been given time till June 2009 to complete the project as there were issues related to transportation, Defence Ministry clearance and working times.

He explained that there were several issues over transporting heavy machinery to the north by sea and unloading them at the KKS harbour. "Then there was  time lost on receiving security clearance for the people working on the project to travel to the north."

Working hours in the north also differed on a daily basis, according to Amaratunga.

"Also, the cyclone that hit the north damaged the plant," he said. The contractual obligation for the project runs till June.

Amaratunga denied that the plant was installed with old equipment and said the plant at present generates 13MW of power as per demand basis, but is not fully connected to the grid. He also said that once commissioned, the plant would generate up to 35MW of power to the north.

Speaking of the fuel needed by the plant to generate power, Amaratunga said the equipment installed in the plant are designed for heavy fuel (furnace oil). However, he said that currently there was no facility in the north to receive furnace oil.

Amaratunga said that  his company had  almost completed the laying of a pipeline for the supply of furnace oil.

"The plant at present operates on diesel, but would revert to furnace oil later on. Generating power using furnace oil is cheaper," said Amaratunga.

CEB to sell 51% of its shares in West Coast Power

JVP affiliated trade unions allege that the CEB, which is unable to find the funds to pay West Coast Power that is handling the operations of the Kerawalapitiya power plant, is currently looking at the possibility of selling part of its shares in the company.

West Coast Power is a fully owned subsidiary of Lanka Transformers Limited (LTL), which in turn is a subsidiary of CEB. The government at present holds 63% of the shares in LTL.

Convener, Lanka Viduli Sevaka Sangamaya (LVSS), Ranjan Jayalal told The Sunday Leader that the unions have reliably learnt that the Treasury had proposed to the CEB to sell 51% out of its 63% stake in West Coast Power to enable it (CEB) to take full control of the Kerawalapitiya power plant. The amount due from the CEB for the purpose according to Jayalal stands at Rs. 3,008 million.

"The CEB has no option but to take over the Kerawalapitiya power plant. A unit generated at the plant is currently sold to the CEB at Rs. 41.80 and the Board has to therefore incur a heavy loss when distributing it to the consumers," he said.

The Kerawalapitiya Combined-Cycle Gas-Turbine (KCCGT) was commissioned with the aim of providing low cost electricity to consumers. He added that the CEB is currently considering the option of selling part of its shares in order to find money to take over the Kerawalapitiya power plant.

CEB Chairman, E.A.S.K. Edirisinghe and General Manager, Bhadra Jayaweera were not available for comment.









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