Kerawalapitiya Power Plant: TU action affects tender procedures causing delays

Power experts warn that the 2018-2019 periods may present some challenges for the power and energy sector. Explaining the situation to Ceylon Today, Energy Expert Dr. Thilak Siyambalapitiya said that the delays in the proposed 300 MW Liquid Natural Gas (LNG) Combined Cycle Power Plant in Kerawalapitiya would lead to excessive expenditure. This is one of the reasons causing a quandary related to the tender of the Kerawalapitiya Power Plant.

On the other hand, the Ceylon Electricity Board (CEB) has by now rejected the implementation of the Long-Term Generation Plan (LTGP), which was designed by the Public Utilities Commission of Sri Lanka (PUCSL) in place of the plan designed by the CEB for the period 2020-2037.

CEB General Manager, A.K. Samarasinghe has sent a letter to the Attorney General inquiring if the LTGP is illegal. Reliable sources told Ceylon Today that a superior political authority of the country had instructed the Attorney General not to reply to the letter.

The Cabinet Committee on Economic Management (CCEM) has informed the CEB that the consent of the Attorney General is not necessary and the LTGP must be implemented. The professionals in the power sector allege that the situation proves the interference and influence of political authority in terms of the decisions of the professionals in the power sector.

The Ceylon Electricity Board Engineers’ Union (CEBEU) has also emphasized now that they will not implement the LTGP designed by the PUCSL. The CEB will have to face a severe crisis in case the CEB engineers quit the Technical Evaluation Committees (TEC). Last year, the CEBEU withdrew their members from the TEC, because the PUCSL approved only the last 4 years of the 20-year LTGP. This trade union action affected all the tender procedures. The construction of power plants will be further delayed in the context of the engineers resorting to such trade union action. The final impact will be on the consumers.

Permanent closure of Sampur – costly decision

No major power plant was constructed in Sri Lanka after the third phase of the Norochcholai Coal Power Plant was commissioned in 2013. The CEB warned many years ago that a severe power crisis would hit the country by 2018-2019 unless a permanent major power plant was constructed. Accordingly, plans for a 300 MW coal power plant were drawn up in Sampur with Indian assistance and it was to be commissioned by 2017 according to the original plan, but the government decided on 14 September 2016 not to proceed with the coal power plant in Sampur. Professionals alleged that the government’s shortsighted decision was the reason for the power crisis in 2018 and 2019.

According to a feasibility study done by Dr. Thilak Siyambalapitiya in 2014 (about importing gas to Sri Lanka) recommendations have been made that LNG plants are required to be established in line with the coal power generators.

“But the Government of Sri Lanka suspended construction of coal power plants. Coal power plants were removed from the LTGP of the PUCSL too. The same old vicious cycle is now in effect. That is purchasing emergency power from high cost diesel generators.

This is as a result of the suspension of the Sampur Coal Power Plant. By 2020, Sri Lanka will have to purchase 60% of the country’s power requirements from the diesel generators. The extra cost for suspension of Sampur is US$ 160 million. In a nutshell, the loss due to the Central Bank Bond scam is peanuts compared to the loss caused by the suspension of Sampur,” Dr. Siyambalapitiya highlighted.

The alternative for the Sampur Power Plant proposed by the LTGP was the 300 MW LNG power plant in Kerawalapitiya. But concerned parties alleged that, the tender for that project was marred by the illegal manner in which it was handled by the Standard Cabinet Appointed Procurement Committee (SCAPC) consequent to disagreements with the Technical Evaluation Committee (TEC).

The new LNG plant is to be established on the land on which the 300 MW West Coast diesel powerhouse has been functioning since 2010. Therefore, no delays occurred in terms of land acquisition and international bids could be called for the supplier. Problems occurred in the bidding process, but the TEC recommended the following bidders as suitable for financial bidding:

1. The Consortium of Samsung C&T, Komipo, and GS Energy
2. The Consortium of Sojitz Corporation
3. CGNPC International Limited
4. Consortium of GCL
5. Korea Southern Power Co. Limited
6. Lakdanavi Limited. (Lanka Transformers (Pvt) Limited)
7. Hyflux Limited
8. Consortium of Summit Power International (Pvt) Limited

Tug of war between the TEC and the SACPC

Only Samsung C&T, Komipo, and GS Energy had fulfilled the minimum functional specifications, as viewed by the TEC. The committee, however, recommended financial bidding opened for five of the other seven companies on the basis of negotiations. The recommendation was aimed at guaranteeing the competitiveness of the tender process. The TEC decided that the other two companies had not qualified, but the SCAPC decided that financial bidding should be opened for only Samsung, which had fulfilled the minimum functional specifications. The SCAPC argued that allowing only five companies to correct the shortcomings of their tender applications, when seven companies had not fulfilled minimum functional specifications was not accurate. Accordingly, financial bidding had to be given to the company which had fulfilled the minimum functional specifications even though it was the only one which had fulfilled the requirements, the SCAPC said. The SCAPC further said that all eight bidders should be given the opportunity to correct their tenders otherwise.

However, the media exposed the decision to open financial bidding for only the Consortium of Samsung C&T, Komipo, and GS Energy which had fulfilled minimum functional specifications. The CEBEU protested the move on the basis that it would ignore the competitive bidding. The media further reported that the SCAPC was preparing for a tender scam.

The five-member SCAPC was chaired by Secretary of the Ministry of Foreign Services G.S. Vithanage. The other members were Dr. Suren Batagoda, D. Thilakasena, K.A. Vimalenthiraja and G.R.L. Wasantha.

However, the Subject Minister, Ranjith Siyambalapitiya, the Secretary of the Ministry, and the General Manager of the CEB, A.K. Samarasinghe highlight that the SCAPC is not bound to admit the decisions of the TEC. In this backdrop, Minister Siyambalapitiya took measures to temporarily suspend financial bidding and to call for a report from Dr. Batagoda, the Secretary of the Ministry of Power and Renewable Energy. “I will not allow any malfunction to occur in this tender. It is very complicated. Many people are trying to push their unsolicited proposals, but I will not let any illegal act to take place,” the minister said.

Finally, the decision was given to the CCEM, which recommended that they implement the decision of the SCAPC. Thus, the recommendations of the TEC were ignored and the tender of the Samsung C&T, Komipo, and GS Energy was opened for financial bidding on Friday, 11 August. Ultimately, that company too was disqualified because of failure to submit an endorsed tender paper.

It was done in front of other unsuccessful bidders and it was found that the selected company had not submitted a written and signed financial bid, but only a soft copy in a flash drive. The bid is not considered valid if the prices are not filled in the specified sheet and if it isn’t signed and sealed. On the request of the bidder, the Bid Opening Committee had tried to open the soft copy, but had failed due to technical issues.

Is it sabotage?

The CEBEU alleged that it was a planned attempt to foil the competitive bidding process. “That’s how the diesel mafia works. There are a lot of underhand business deals taking place in this multi-million dollar business. One group belonging to the ’emergency diesel mafia’ wants to delay this project. With this unreasonable decision of the SCAPC, the bidder may go to Court causing further delays and it will pave the way for their high cost emergency power business,” they noted.

Meanwhile, Battaramulle Seelarathana Thera filed a writ numbered 213/2017 in the Court of Appeal challenging the rights of the Lakdanavi Company participating in the tender. Lakdanavi is a subsidiary of Lanka Transformers Limited (LTL) owned by the CEB.

The Secretary of the Ministry emphasized that the Appeal Board might have the opportunity to correct errors, if there are any, caused by the TEC and the SCAPC. Any bidder who is not satisfied about the ruling of the Appeal Board may file a fundamental rights petition in Supreme Court.

In this context, re-tendering may take a further 9-12 months and it will further delay the construction of the LNG plant. However, as per a recommendation of the CCEM, the ministry has now decided to open financial bidding for five bidders out of six.

Resignations in the SCAPC

The SCAPC Chairman, G.S. Vithanage and G.R.L. Wasantha have quit amidst this crisis. Now, the Tender Board has to be replaced before the financial bidding of the five companies is opened. Further, the tender process may freeze if a discontent bidder files a case in Court. This might further delay the construction of the LNG power plant.

Responding to a query by us, the General Manager of the CEB, A.K. Samarasinghe said that he did not believe that a plan to disrupt the Kerawalapitiya Tender was underway. However, bidders and other sections had many chances to supply power from diesel generators at higher rates by way of disrupting a tender process, he admitted.

“In whatever circumstance, the delay in construction of the Kerawalapitiya LNG Plant may push us to a severe power crisis in 2019.

We will have to either impose power cuts or purchase supply at higher rates,” the General Manager added.

Political decision not to impose power cuts?

The President of the CEBEU, Samya Kumarawadu warned that the power demands would not be balanced in 2020, which might be an election year. He further warned that the entire country would be put in darkness during election time, but Minister Siyambalapitiya highlights since the past drought no power cuts will be imposed under any circumstances. He guarantees power supply around the clock. His statement seems like a political decision of the government. Therefore, the government seems unlikely to lose a popular slogan during an election in 2020.

We are not proposing power cuts of several hours. In the past six months alone, the ministry had to acquire emergency power valued at Rs 5 billion. A unit of electricity purchased from a company called Agrico was valued at Rs 28. The contract of 60 MW is to be finished soon.

Although we are receiving bit of rains now, hydropower is still 25% of the total generation. About 41% of the power requirement of the country is now fulfilled with diesel power. Internal sources at the CEB said that the ministry had decided to acquire a further 100 MW of power from Agrico at a rate of Rs 30 per unit.

The ministry has also planned to set up a 100 MW diesel barge in Galle and four 24 MW generators. It has also decided to acquire diesel power from the 100 MW plant in Embilipitiya and 24 MW plant in Matara.

If a 300 MW Kerawalapitiya LNG Plant is constructed after the tender problem is resolved, it will provide a further 300 MW by utilizing diesel power because a LNG plant needs to be run for four years with diesel until it is converted to LNG. Accordingly, 720 MW of the national power requirement will be generated by burning diesel.

A vicious cycle

Dr. Siyambalapitiya points out that 41% of the power requirement of Sri Lanka has been fulfilled with diesel since January 2017 even though Sri Lanka does not produce a drop of diesel. “This is a record. We recorded the same in the 2013-2014 period and we have regained it,” he stated.

In this backdrop, the consumer can predict how the government is going to act before the upcoming power crisis. Public money is spent for high cost diesel generation. The government is not reluctant to spend public money for diesel to guarantee a stable power supply.

Power Expert, Professor Kumar David has emphasized from the very beginning that the decision to suspend the Sampur Coal Power Plant was a costly decision in this backdrop.

Former President of the CEBEU, Athula Wanniarachchi who is critical about the use of diesel generators argued that they had no other option if low cost coal power is totally aborted. “The government does not clear land for the CEB to build a clean coal power plant in Sampur with the assistance of Japan. They want to acquire diesel power at higher rates. We have no other option. If we don’t have Kerawalapitiya, we will have to purchase diesel power,” he said.

If Kerawalapitiya cannot be added to the national grid by 2019, we will simply have to purchase diesel power at a higher cost.Commenting on the situation, the President of the CEBEU, Kumarawadu expressed the following views: “The CEB incurs a loss of Rs 15 billion per year in case the rate of a unit of electricity is increased by Rs 1. Already, the CEB is not making any profit and when the unit price of the emergency power supply is Rs 30 and if we have to purchase 300 MW of emergency power, Sri Lanka will be pushed to an economic disaster which can never be resolved.”

Dr. Siyambalapitiya argued that the Kerawalapitiya Plant would not be added to the national grid in 2019 in this backdrop. “The bidders may leave the country. A tenderer has spent about US$ 1 million for the tender application alone. Who likes to lose money like that?” he questioned.

He further pointed out that progress had been recorded in the electricity sector from 2005 to 2015. He argued that the situation had worsened after 2015 and now the decisions taken were not transparent.

“The Ministry of Economic Affairs has a committee on LNG which comprises of Indian and Japanese diplomats and several engineers. How can the diplomats take decisions on construction of power plants?” he questioned.

Power Mafia

Internal sources of the CEB and power experts point out that a power mafia has created a fear psychosis since 1994 to their benefit. They argue that this aversion to coal power, which is the next cheapest in comparison to hydropower, has been craftily inculcated in the minds of the people so as to promote their highly rated diesel generators for power supply.

“It is common that the people agitate against the power plants. The rulers who suspend building power plants in fear of the environmental and civil organizations cannot be considered governments. They must consider the recommendations of the Court and build power plants according to environmental standards, but in Sri Lanka, power plants are suspended immediately after people file cases. After that, emergency diesel power is purchased at high rates. Why do we need a government for this?” Dr. Siyambalapitiya questioned.

The stage has been set for the next round and the diesel mafia is waiting for an opportunity. The tug of war in the tender process of Kerawalapitiya can be the same. Diesel generators will bridge the supply and demand gap in the power sector which has been created by the delay in constructing the Kerawalapitiya LNG Plant due to the tug of war between the TEC and the SCAPC.

Businessmen, politicians, officials, and engineers point fingers at each other, but the consumers have been left in the dark in terms of the power crisis until they clearly understand what the power mafia is up to.