PUCSL and CEBEU blame each other over arbitration case that could cost US$ 160mn to SL

• CEBEU sends letter to President blaming the whole case on a letter issued by PUCSL to Malaysian investor
• PUCSL says letter to President is a diversion tactic by CEBEU to conceal their guilt
• CEB has so far spent over Rs.200mn in legal fees on foreign lawyers in defending the case 

By Nishel Fernando 
The Ceylon Electricity Board Engineers’ Union (CEBEU) and Public Utilities Commission of Sri Lanka (PUCSL) are throwing the blame at each other as a Malaysia-based renewable energy investor has resorted to arbitrary action against the Ceylon Electricity Board (CEB) for the cancellation of 35MW wind and solar power renewable energy project in Kankesanthurai while claiming US$ 160 million in damages from the Sri Lankan government. 

KLS Energy Lanka Sdn. Bhd. and KLS Energy Lanka (Private) Ltd filed an arbitrary case in Washington-based International Centre for Settlement of Investment Disputes (ICSID) against Sri Lanka (ICSID Case No. ARB/18/39) claiming that Sri Lanka had violated the bilateral investment treaty between Malaysia and Sri Lanka as CEB went on to cancel a project which was awarded to the firm.

Consequently, the appointed tribunal held its first session via telephone conference in 2019 and issued Procedural Order No. 8 concerning procedural matters of the case in July this year.

CEB had signed a power purchase agreement with the Malaysian investor in 2009. However, KLS Energy, which claimed to have invested in the said renewable energy project, blamed CEB for not honouring the terms of the agreement, while the CEB went on to cancel the project eventually. 

The CEBEU in a letter to President Gotabaya Rajapaksa late last month claimed that a letter issued by the PUCSL to current Director General (DG) Damitha Kumarasinghe on behalf of the then PUCSL DG Prof. Ranjith Perera had given unnecessary legitimacy to the power purchase agreement entered into between the CEB and the Malaysian firm.

“A power purchase agreement was signed by CEB with this company as per the instruction of PUCSL. We understand that an arbitration case is ongoing at present and CEB has already paid a huge sum of money (more than Rs.200 million) for foreign lawyers and other related matters. 

It is said that the claim of the company is around US$ 160 million and Sri Lanka may have to pay this amount if the arbitration case is lost. One of the main evidence produced by KLS Energy to prove their damages is said to be the illegal letter dated 2009.12.30 issued by Damitha Kumarasinghe,” the letter stated. 

However, Kumarasinghe denied all allegations levelled against him and the PUCSL, while stressing that the PUCSL or the letter signed by him haven’t given any instruction to CEB to sign a power purchase agreement. 
Further, he pointed out that no license was issued to KLS Energy by PUCSL due to non- fulfillment of the eligibility criteria stipulated and under Section 9(1) (c) of the Sri Lanka Electricity Act.

“CEB has entered into a power purchase agreement with a party that has not fulfilled statutory requirements to be eligible to obtain a generation licence. This is a violation of the Sri Lanka Electricity Act. How can KLS produce PUCSL as evidence since the letter clearly states they are not eligible for a licence and a licence was never issued by PUCSL,” he said.

Meanwhile, the CEBEU claimed that Kumarasinghe was neither appointed as the Director General nor was covering the duty of the DG at the time of signing the letter dated 2009.12.30 and charged that Kumarasinghe had failed to obtain the approval of the Commission to issue such a letter. 

Responding to these allegations, Kumarasinghe noted that the letter was issued under the instruction of the then PUCSL DG, Prof. Perera while emphasising that it is standard practice to issue such no-objection letters by an official other than the PUCSL DG without the approval of the Commission, but with the instruction of the DG. 

Concluding the letter, the CEBEU has requested President Rajapaksa to initiate an investigation with regard to the issuing and signing of this letter by Kumarasinghe either through the Auditor General or the Bribery Commission.
However, Kumarasinghe views CEBEU’s letter to President Rajapaksa as a mere diversion tactic from the real issue of the case, in order to defend CEBEU and its membership’s illegal actions.