PUCSL nod for PPA of 300MW Kerawalapitiya LNG power plant

The Public Utilities Commission of Sri Lanka (PUCSL), the electricity sector regulator, has approved the power purchase agreement (PPA) to build the 300 MW Kerawalapitiya liquid natural gas (LNG) power plant in Sri Lanka, under the new chairmanship and board members, last week.

The power purchase agreement will be signed by the Ceylon Electricity Board (CEB) and Lakdhanavi (Pvt.) Ltd. 

“The power purchase agreement of 300 MW Kerawalapitiya LNG approved by the PUCSL will be implemented with conditions more favourable to the electricity consumer, CEB and government. The PUCSL recommended the inclusion of 18 amendments, which were not included in the previous power purchase agreement submitted for approval and the CEB and Lakdanavi have agreed to include those favourable terms. Accordingly, the agreement approved by the PUCSL is more favourable to the consumers, government and CEB. The CEB will purchase electricity for 20 years under this agreement,” PUCSL Chairman Janaka 
Ratnayake said. 

The unit price of electricity supplied by this power plant is Rs.14.98. Both diesel and LNG fuels can be used to generate electricity and the initial phase of generation will continue to use diesel fuel until LNG or natural gas supply begins.

The CEB sought the approval of the PUCSL for the tendering of this LNG power plant on November 15, 2016 and the PUCSL approved the process within two days (November 17, 2016). The CEB is responsible for selecting the most suitable party to build this power plant through a tendering process and it has taken about four years to complete the tender process for this power plant. 

Following the completion of the tender process and the selection of the eligible party, the relevant purchase agreement was submitted for the approval of the PUCSL on October 9, 2020, by the CEB.  However, it was revealed that there were discrepancies between the new agreement submitted by the CEB and the original agreement approved by the PUCSL.  In particular, the 18 amendments contained in the original agreement were not included in the final agreement submitted for approval.

The PUCSL recommended to the CEB to reinclude these conditions in the agreement as the removal of these conditions will be detrimental to the consumer, government and CEB.

Subject to those amendments, the conditional approval for the final agreement was granted on November 25, 2020. Following the recommendations of the PUCSL, the CEB amended the final agreement and submitted the final agreement for the purchase of electricity on December 1, 2020, for approval. However, by the time of the submission of the final agreement, the then members of the commission had resigned from their posts. 

The new members were appointed to the commission in the first week of February 2021 and at the first meeting of the new board, the final approval was given for the 300 MW LNG power plant agreement.

“The PUCSL expects the CEB will take actions to expedite the construction of this 300 MW LNG power plant to cater to the country’s electricity demand,” Ratnayake added.