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 Post subject: Second coal power plant to commence operations from 2011
 Post Posted: Sat Dec 30, 2006 4:11 am 
Second coal power plant at Sampur in Trincomalee
Several more power plants in the pipe-line

The new 2x250 Megawatt power plant will help Sri Lanka to achieve a better position in terms of energy security and will encourage the establishment of new industries through the greater availability of electricity. The power plant is expected to commence operations from 2011

@ LL / 29DEC2006 /RH

The Board of Investment of Sri Lanka yesterday entered into an agreement with National Thermal Power Company limited (NTPC) of India and the Ceylon Electricity Board (CEB)to set up a coal based 2x250 Megawatt Power plant at Trincomalee.

The power plant is expected to commence operations from 2011. With the signing of the Agreement will commence the process of site selection in Trincomalee which will be done on the basis of techno-economic and environmental feasibility studies and other relevant matters including availability of infrastructure etc.

National Thermal Power Corporation will conduct a feasibility study of the project, which is likely to take about six months, with land already identified. The plant due to be completed by 2011, will burn about 2.5 million tonnes of coal a year which will is likely to be imported from Indonesia or Australia.

The plant is a state of the art, environmentally friendly facility that will use coal as fuel.

This project is the second coal power plant lined up for the island, with the first 300-megawatt plant to be constructed in Norachcholai, also by 2011.

Sri Lanka needs large, low cost power to cope with the country’s energy demand, growing at about ten percent each year.

Delays in implementing large-scale projects, in some cases for decades, has resulted in over half the island’s power generation coming from expensive liquid thermal power.

The project is a Built, Own, Operate (BOO) Joint Venture Agreement between NTPC and the CEB. The new agreement covers a number of issues such as the equity of the joint venture, the project implementation modality including the power purchase agreement, the project implementation agreement and the supply of coal to the plant.

Another aspect of the agreement covers the provision of 500 acres of land in Trincomalee on a long term lease.

The Cabinet of Ministers granted approval to this project at meetings held on November 15, 2006 and December 19, 2006 for the Ministry of Power and Energy to enter into an agreement with the Joint Venture.

There will be several phases to the project. In the first instance, the Treasury will provide US$ 75 million for the CEB to subscribe its equity contribution of 50% towards the JVC. The treasury will also provide US$ 70 million for the CEB to commence the construction of a transmission line from Trincomalee to Veyangoda and to upgrade the existing grid sub stations.

The BOI will facilitate the project by granting tax holidays and other duty waivers for 25 years and help with obtaining the 500 acres that were needed for the project.

In addition a US$ 75 million jetty will be constructed to handle the cargo needed by the facility. This will include not just machinery but also the coal supplies to power the plant. The jetty will be constructed by the Sri Lanka Ports Authority.

The new power plant will help Sri Lanka achieve a better position in terms of energy security and will encourage the establishment of new industries through the greater availability of electricity.

Sri Lanka's electricity generation sources were mainly hydropower until the 1990s, and it had tilted towards thermal power with the increase in demand in electricity. At present it stands at 36 per cent hydro to 64 per cent thermal. However, with the rising prices of oil, the cost of electricity production from oil fired thermal power also increased and it had an enormous impact on the country's economy.

This was the second coal power plant that they intend to set up in Sri Lanka and perhaps it would be the largest in the country, as it envisages the generation of 500 MW in the first two stages, with plans to go up to 1000 MW.



China funds Puttalam coal power project

Phase I of the power plant which includes the installation of a 300 MW Coal Power Plant in Norochcholai, Puttalam.

Last September the Government of China through the Export Import Bank of China agreed to provide a credit package in US$ 455 million for the implementation of the proposed Puttalam Coal Power project.

Of this, US$ 300 million is provided as a concessional loan under a Preferential Buyer's Credit Agreement while the balance US$ 155 million is provided under a Buyer's Credit Agreement, the Finance and Planning Ministry said.

This power plant will be built in three phases of 300 MW capacities each up to the final plant capacity of 900 MW. The proceeds of the credit will be used to implement Phase I of the power plant which includes the installation of a 300 MW Coal Power Plant in Norochcholai, Puttalam, all the auxiliary equipment/ systems, including a coal unloading jetty, a 115km power generation line and other infrastructure facilities.

The proposed project will be operated as one of the base load plants with the capacity of operating at partial loads when required, utilising coal as the source of fuel for power generation.

The total cost of the project including the infrastructure such as transmission lines and jetty facilities, is estimated at US$ 455 million.

The weighted average interest rate of the total loan amount of US$ 455 million is approximately 3.5 per cent per annum with a 15 to 20 year repayment period including a grace period of five years.

The loan agreement was signed by Dr. P.B. Jayasundera, Secretary, Ministry of Finance and Planning on behalf of the Government of Sri Lanka and Li Yong, Assistant General Manager, Export Import Bank of China on behalf of the Government of China at the Ministry of Finance and Planning.



Upper Kothmale hydropower plant to be commenced

In addition to the construction of the two coal power plants, the planned 150 Megawatt Upper Kothmale hydropower project is also expected to be commenced in 2007.

Around 500 families from Talawakelle whose lands have been acquired for the project will be settled in alternative places as the first step of the construction of the hydropower station, says the Ministry of power and Energy.

"We have already completed the construction of 495 houses. They will be handed over to the families next month. The housing scheme will be equipped with infrastructure including roads, schools, community halls and religious places," a Ministry spokesman said. The construction of the tunnel leading to the power station will be commenced as the next stage of the project.

The Upper Kothmale hydropower project which is estimated to cost around Rs. 92.8 billion is funded by the Japanese Bank for International Cooperation. The project is expected to be completed by 2010.



Liquefied Natural Gas (LNG) Plants in Kerawalapitiya and Mirissa

Japan is to help Sri Lanka expand its energy mix, with financial backing to build a liquefied natural gas power plant in Wattala, a top official said.

Sri Lanka’s Treasury Secretary P B Jayasundara says the government hopes to have an LNG (Liquefied Natural Gas) plant up and running by 2009, to compliment a 300 megawatte coal fired power project that is being built with Chinese help.

Cost of electricity generation now ranges between 10-12 rupees per unit, but the state power utility, the Ceylon Electricity Board sells a unit at an average price of about 9.00 rupees. The CEB is expected to post a 20 billion rupee loss this year, for selling power below costs of generation of a unit.

The government earlier announced plans to set up a 300 megawatte combined cycle plant in Kerawalapitiya, but energy analysts say the project has been delayed due to protracted wrangling within an opaque procurement process with Sri Lanka’s Cabinet of Ministers changing terms in mid process.

Sri Lanka plans to build another 300 megawatte liquefied natural gas plant with Iranian assistance in Mirissa.

Cabinet has given the greenlight to carry out a feasibility study to build the plant in Mirissa.

Iran's Energy Ministry is to assist in this project, following a memorandum of understanding signed between Colombo and Teheran earlier this year.

"Iran is highly developed in power plant manufacturing industry and is able to meet the domestic requirement of power plant construction. Sri Lanka power industry can benefit through mutual cooperation between the two countries," a statement said.


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 Post subject: govt. agrees to restructure Rs. 60 bn electricity board debt
 Post Posted: Sun Dec 31, 2006 6:53 pm 
Sri Lanka govt. agrees to restructure Rs. 60 bn electricity board debt

The CEB sells about seven billion units of electricity each year, with households using up 2550 million units with an almost equal amount used up by industries.

@ LBO /30 December 2006

December 30 (LBO) – The Sri Lanka government has agreed to offload half the 60 billion-rupee long-term debt of the Ceylon Electricity Board from January and re-schedule the balance to be paid after five years.

"To allow the Ceylon Electricity Board to begin with a clear balance sheet from January 01, the government has agreed to offload 50 percent of CEB’s long term debt, to be re-issued as share capital of the CEB," M M C Ferdinando, secretary to the power ministry, told LBO on Friday.

"The balance 50 percent is to be re-scheduled by the government, allowing the CEB to repay in monthly installments after 2011, after commission of the coal power plant in Norachcholai."

Sri Lanka's first coal power project is due to be completed in 2011, bringing down high costs of generating electricity from expensive liquid thermal plants.

Operating Deficit

According to provisional data from the Central Bank, CEBs net operating losses were up 16 percent in the first half of this year to 8.8 billion rupees.

Short-term bank borrowings by CEB amounted to 10.4 billion rupees, while payment arrears to Ceylon Petroleum Corporation and Independent Power Producers stood at 15.3 billion rupees as at end June.

The debt ridden utility is also expected to post a 20 billion-rupee loss this year, though a recent domestic tariff hike should also slow the slide in CEB finances next year.

In February this year, the CEB increased fixed charges by 100 to 275 percent and in September jacked up unit tariff rates by 30 percent, to partly offset the utility's losses.

The average tariff however, after the revisions at 9.26 rupees a unit, is still lower than the average cost of generation at 10.76 rupees a unit.

Tariff Cut

Meanwhile, industrial users are to also get a tariff cut from February next year, resulting in an annual loss of a billion rupees, a CEB official said.

A 20 percent fuel adjustment levy currently charged on every unit of electricity used by industrial customers is to be removed.

Domestic users were also exempt from a 15 percent Value Added Tax in this year’s budget, but this is to be incorporated into the household tariff, to partly offset losses from industrial use.

"The VAT is being absorbed into the tariff, so there will be no change in the household bills. This will partly offset the cost of lowering industrial tariffs, but there will still be a one billion rupees loss annually," the CEB official said.

Industrial users are charged in three bands – Retail users with a maximum demand of 42 KVA are charged 8.50 rupees a unit, medium scale users at 8.10 rupees a unit and large industries that use a high voltage supply are charged 8 rupees a unit.

In addition, medium and large industries have to pay a 3000 rupee fixed charge each month.

The CEB sells about seven billion units of electricity each year, with households using up 2550 million units with an almost equal amount used up by industries.


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 Post subject: Proposed Kerawalapitiya power plant runs into crisis
 Post Posted: Sun Dec 31, 2006 7:45 pm 
Proposed Kerawalapitiya power plant runs into crisis

The gas turbines at the proposed Kerawalapitiya power plant are to use Heavy Fuel Oil (HFO) also known as Bunker Fuel used mainly in ships. The engineers pointed out that nowhere in the world this fuel was used to run power plants but it appears their suggestion has fallen on deaf ears of the Treasury that is keen to go ahead with this project. The manufacturers themselves have warned that if the engines are run for two months with HFO then it has to be stopped for servicing for another three months.

@ The Nation / Sunday, December 31, 2006

The government’s move to establish a 300 MW power plant at Kerawalapititya has run into deeper crisis than ever before.

The government has now confirmed that the contract will be awarded to Lakdhavani, a subsidiary of Ceylon Electricity Board (CEB) to construct two power plants each of 300 MW using Combined Cycle Gas Turbines (CCGT). These gas turbines are to use Heavy Fuel Oil (HFO).

However the argument that is trotted out by several other experts in power generation is that the HFO does not meet the fuel specifications for gas turbines, established by manufacturers and hence HFO based CCGTs is not a technically feasible option.

It has been pointed out to the CEB time and again that the establishment of the power plant would cost the nation some USD 149.66 million per annum or USD 2, 993 million over a 20 year period. In rupees this works out to about 15,664 million per year or Rs. 313, 280 million over a 20 year period.

Fuel Definitions

The term Dual Fuel has been used recently to describe fuel choice for CCGTs particularly by Lakdhanavi. Dual fuel implies two types of fuels. Duel fuel has been described at various times as Automotive Diesel Fuel (ADF) and Liquefied Natural Gas (LNG) or ADF and Fuel Oil (FO). What precisely are the fuel choices intended?

In Sri Lanka, according to senior and seasoned power generation experts who do not wish to be quoted, the only fuels available at this time are ADF and FO.

LNG requires high capital cost investments in the range of USD 300 million plus and hence is not a feasible option at this time. The choice then the experts say is ADF or FO. They say ADF costs about twice as much as FO and power generation using ADF in CCGTs could hence cost almost twice as much than from Reciprocating Diesel Engines (RDEs) that use FO.
Experts point out that putting up the terminal with LNG is too costly. It costs around 500 to 800 million US dollars. They also say the next option is to run the turbines in auto diesel which again is costly.

According to government surveys the CEB started to accrue heavy losses since 1996 only after it introduced diesel power generation. Experts say nowhere in the world auto diesel is utilized for power generation.

Government tricked

As soon as the UPFA government came into power, those with vested interest suggested power plants with duel fuel. This means the turbines could be run either with gas or auto diesel.

Subsequently due to heavy protest the government shelved this idea.
Then another proposal was made to run the turbines with Heavy Fuel oil (HFO) also known as Bunker Fuel used in ships. Again the engineers pointed out that nowhere in the world this fuel was used to run power plants but it appears their suggestion has fallen on deaf ears of the Treasury that is keen to go ahead with this project.

However it is learnt the Ministry of Power and Energy has sought cabinet approval for the use of HFO.

The HFO according to experts from the Power and Energy Ministry will not be able to run for a longer period. The manufacturers themselves have warned that if the engines are run for two months with HFO then it has to be stopped for servicing for another three months. Therefore the experts say the current loss of Rs. 40 million the CEB incurs would be increased to some times even to Rs. 100 million.

The fuel oil available with the Ceylon Petroleum Corporation (CPC) (HFO) has the vanadium, sodium and sulfur contents of 150 Particle per Minute (PPM). The engine that is required to run the power plant proposed by General Electric (GE) has 5 PPM.

The FO specifications produced by the CPC exceed all of the critical characteristics required by GE, experts say.

The power plant that is to be commissioned by Lakdhanavi is designed for LNG.

However Sri Lanka has not obtained this resource and therefore the option is to import LNG. Importing LNG as mentioned before will incur heavy costs. And if these machines are used with auto diesel, the experts point out that it will destroy the combustion chamber and create dangerous environmental hazards.

This in addition will also force the authorities to jack up the price of a unit of electricity because the cost to run the machines will be exorbitant, the experts say.

GE’s proposed strategy to use FO in CCGTS

Because FO cannot be used as produced in refineries, GE and JGC teamed together to develop a combined-cycle power generating system making use of HFO. The system to make use of heavy fuel oil for use in combined-cycle gas turbines include the following steps to make a fuel oil extract suitable for use in combined-cycle gas turbines: (a) extraction of a light fraction- 70 % to 90 % from fuel oil, (b) deep demotilization and (c) desulfurization.

The process was never commercialized and hence the acceptable fuels to date for based load and peak operations remain one of the following according to experts: LNG, Natural Gas or ADF.

Use of ADF

A processed fuel oil complying with GE’s specification is not available from the CPC refinery or any refinery in the region. The alternative then is to use Automotive Diesel Fuel (ADF), experts point out. And this they say was going to cost the country billions and this would in turn force the government to jack up the electricity tariff rates.


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