India’s NTPC mulls exit from power venture in Sri Lanka

Financial Expresss: NTPC Ltd. has informed the Government that it cannot accept the fresh terms set by the Ceylon Electricity Board (CEB) for its proposed 500-MW project in Sri Lanka.

Indicating its willingness to withdraw from its maiden overseas venture, the State-owned power generator has sought permission to pull out two of its top functionaries from the island nation.

NTPC and CEB had inked an agreement in 2011 for jointly setting up a 500-MW power project at Trincomalee at a cost of over Rs. 4,000 crore, but the project is yet to take off due to persistent differences between the two entities. NTPC has now expressed serious concerns on CEB’s flip-flop on the joint venture.

In a letter to CEB Chief W. Abeywickrema on 15 January, NTPC Chairman Arup Roy Choudhury said the fresh terms and conditions set by the Sri Lankan State-run electricity board were “unacceptable to NTPC as it amounted to substantial changes agreed on the initial Power Purchase Agreement (PPA)”.

“You will appreciate that the draft PPA was finalised with CEB after prolonged discussions on all issues and then it was initialled in February 2011. In our mutual interest we should not reopen any of the settled issues and now sign the PPA and other agreements without further delay,” Choudhury said in the missive to Abeywickrema.

Separately the NTPC Chief is learnt to have conveyed to Power Secretary P. Uma Shankar and India’s High Commissioner to Sri Lanka Ashok K. Kantha that the CEB was going back on the signed PPA and the project was unable to make any headway.

“In view of the slow progress in the development of the project, NTPC has proposed to bring back two senior level executives posted in Sri Lanka for this project,” a top Power Ministry official said.

The company did not reply to an e-mailed questionnaire in this connection, but a source in the PSU said that Roy Choudhury is upset on the way CEB is dragging its feet. He pointed out that the project was planned and furthered as part of growing bilateral relations between India and Sri Lanka and exuded confidence that CEB would not insist on raking up settled issues.



On 7 January, the CEB Chief had written to Choudhury saying that certain changes needed to be incorporated in the existing PPA including downward revision of operations and maintenance cost of the proposed power plant to Rs. 20.5 lakhs per MW each year from the current Rs. 38.92 lakh. NTPC has protested saying the estimate on this cost was based on its similar sized plants in India and the CEB had been apprised of the same in advance.

Abeywickrema has also demanded that the current returns on investment should also be down scaled to 12 per cent return on equity as against 18 per cent post tax return on the equity base. “This is non-negotiable as the RoI was agreed the Government of Sri Lanka and the CEB in 2006 and is very fundamental to NTPC’s investment decision,” the Power Ministry official said.