At What Cost Coal?

By Camelia Nathaniel

The cost of electricity would increase with the Sampur Coal Power Plant coming into operation, with the unit cost of electricity from Sampur alone set to rise to over Rs. 20, informed sources said.

The Sampur Coal Power Plant, to be developed as a joint venture between the Ceylon Electricity Board (CEB) and India’s National Thermal Power Corporation (NTPC) would incur a capital cost of US$ 500 Mn., with a debt-equity mix of 60%/40%, according to information provided to the Ministry of Energy and the Public Utilities Commission of Sri Lanka (PUCSL) – the Electricity Regulator.

The targeted Return on Equity (ROE) for the investment for CEB and NTPC is 18% on US Dollars, and the interest rate is 10% on USD borrowings, both of which are exorbitantly high for this kind of large scale power generation projects.

The loan period is 15 years. This results in a levelised cost of capital over a 25-year period, of Rupees 10.70 per kWhr.

The financial model presented also considered a base coal price of USD 140 per metric ton, and the plant considers an average coal consumption of 0.44 kg/kWh, resulting in an energy cost component of US$ 9.10 per kWh.

Therefore the cost of production for a unit of electricity from the Sampur Coal power plant will be LKR 19.80 with no operational and maintenance costs included, which are considerable for a coal plant, “which will take the cost of electricity well over LKR 20 per unit”. Sources also reveal that although the split of ownership between CEB and NTPC is still unclear, the fact remains that the CEB being a joint owner of the Independent Power Producer (IPP), selling power to the CEB, is a clear conflict of interest.

Speaking to The Sunday Leader the adviser to the National Electricity Consumer Movement Bandula Chandrasekara said that the production cost per unit works out to around Rs. 15.00, but with the addition of transmission charges the cost per unit would add up to about Rs. 19.00 to 20.00.

“According to the agreement for Sampur though it is a joint venture project between the CEB and NTPC, finally the CEB has to purchase power at a higher price according to a power purchasing agreement between the CEB and the joint venture company,” he added.

Minister of Power Pavithra Wanniarachchi was not available for comments.

5 Comments for “At What Cost Coal?”

  1. Azee

    Don’t worry about the cost just increase the tariffs and force it down peoples’ throats.

  2. The writer has failed to factor in the share of profit accruing to the CEB. Supposing the CEB owns 50% . Out of the 20/= Rs. , 10/= Rs. come back to the CEB. So the actual cost would be 10/=Rs. per KW. Either the writer is fundamentally weak in mathematics or taken for a jolly good ride by the Diesel mafia.

  3. noel-jones

    Because of Indian pressure government signed this agreement. After Indo -Srilanka Accord in 1987 which caused immense problems to SL people and the economy, this is the second instance that Indians trying to sabotage our economy progress. SL government remove Champika Ranawaka from the Power and Energy ministry who vehemently opposed to this Sampur Coal power plant agreement. Earlier Indian’s try to sign FTA which detrimental to our economy. Because of public protests by people, industralists in SL, it is temporary hold back. Step by step Indian’s trying get hold of our economy. Finally the common people in SL have bear the burden of huge electricity bill.

  4. Trevor Jayetileke

    I advised during the “Coal vs Gas” debate not to fire Norochcholai with Coal and instead to use LNG and in fact an Australian Company was much interested to get involved and finance the initial operation but in the end it was bungled as usual and the Government was pushed by the Coal lobby headed by Dr.Thilak Siyabalapitiya to go for the Coal option and thereby we have the present situation.
    To compound the problem we now have gone for phase 2 and 3 at Norochcholia with more coal firing and also gone for a coal fired plant in Sampur with a PPA detrimental to the unit price of power with the unrealistic concessions given as sweeteners. At the end the consumer will pay dearly and both projects could end up as “White Elephants”. Its better to go with the known devil ( oil firing ), than to go with Coal which will cost dearly and the Govt. having to guarantee payment.
    The only winners are those who negotiate the Coal Contracts???????

  5. M.V.R.Perera

    The CEB should go for competitive bidding for a for a BOT coal Power Project with a fair pricing formula and then they will get a price per unit when the full load is taken about 5 US cents at generation which will be about 3.8 rupees at generation with hardly any investment from the CEB. However what is the PUCSL doing they appear to be wasting public funds for their maintenance with no knowledge of thermal generation

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