Amendment to Electricity Act: Who is fooling whom?

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Minister of Energy Kanchana Wijesekera was instrumental in amending the Sri Lanka Electricity Act in Parliament after nine years, sparking a huge uproar. He pointed out that the amendment was necessary for Renewable Energy Initiatives to move through as rapidly as possible adding that it also ensures that the public is made aware of renewable energy investments and plans.

Meanwhile, the Ceylon Electricity Board Engineers Union (CEBEU) had planned to initiate a countrywide strike coinciding with the amendment, though however, it was called off. They are protesting against an amendment that reportedly allows Adani Green Energy Limited (AGEL) to proceed with a 500MW wind power project in Mannar, Pooneryn, without following the right protocols and channels.

According to the CEBEU, this would put an end to the country’s competitive power generation bidding process.

Chairman of the Ceylon Electricity Board (CEB) M.M.C. Ferdinando said the change to the CEB Act will replace the word ‘AND’ to ‘OR’ in various clauses but was not specific about it. Further it appears that the project’s feasibility assessment has not yet been formally filed to CEB.

Why a 500 MW wind farm in Mannar, Pooneryn?

According to a detailed analysis completed by the United States Agency for International Development (USAID) in 2001, Mannar and Pooneryn are among the most appropriate places in the world for wind power generation. Using the limitless wind flow available in this area, almost 20 per cent of Sri Lanka’s national electricity requirement can be easily generated in an environmentally -acceptable manner at a very low cost.

A good example is CEB’s Tambapavani wind power facility, which has a capacity of 100MW and is already operational. Building wind farms in the Mannar area is the simplest approach to ensure Sri Lanka’s energy security in the future. As a result, the CEB from 2021 has been incorporated into the long-term power generation strategy.

Why did Govt intervene?

After the current administration assumed power in 2019, CEBEU said it has come to light that a Cabinet Paper had been prepared in early 2022 to obtain clearance for Adani Group’s building of a 500MW wind power facility.

They further learnt that Minister Wijesekara has since requested the Sri Lanka Sustainable Energy Authority to approve the said project.

“Our attorneys have pointed out that the aforementioned Cabinet decision is fundamentally inconsistent with the provisions of the Constitution and legal standing, and is hence such an instrument becomes null and void. Therefore, we urgently urge the competent public authorities not to carry out Cabinet decisions which have no legal basis or binding. We would also like to remind you that any of these Government officials who authorise the project’s implementation would be held accountable for any subsequent legal or judicial action,” CEBEU claimed.

How did AGEL get involved?

AGEL is a part of the Adani Group, one of the India’s major conglomerates which has been entrusted with the 500 MW Wind Power Project in Mannar and Pooneryn through a MoU whose signatories are; former Secretary to the Treasury S.R. Attygalle, former Secretary to the Ministry of Power Wasantha Perera, Ceylon Electricity Board (CEB) Chairman M.M.C. Ferdinando, Chairman of Sri Lanka Sustainable Energy Authority (SLSEA) L.H. Ranjith Sepala, Chairman of Board of Investment (BOI) Raja Arachchige Edirisuriya and CEO of Adani Green Energy Limited Karan Gautam Adani.

According to the CEBEU, the Government is planning to hand over a 500 MW wind power project in Mannar and Pooneryn to AGEL without following the normal procedure of a competitive bidding process and in violation of stipulated rules and regulation; with political intervention and with an ulterior motive of robbing the country to the tune of USD 3,300 million.

However, in response to this accusation the CEB Chairman Ferdinando said that the intention is to boost renewable energy by 70 per cent, in line with the President’s election pledge, and that was not an easy undertaking, for which an additional 500 MW from renewable energy should be added to the national grid.

“So, we were discussing on how to achieve that objective, and presented our views and ideas for obtaining loans and releasing funds to relevant stakeholders. In this process, Adani Group Limited got involved after a dialogue with the State, instead of the CEB. Subsequently Adani Group announced its interest in the project in November 2021 in response to a proposal from the Indian government and were willing to invest in the 500MW project,” he explained.

He further said the Government got the necessary approval for the proposed Power Plant. Since the Adani Group was willing to invest USD 500 million a MoU was duly inked.

Is the cost of electricity going to be measured in dollars?

CEBEU further said that if the Adani Group’s 500MW wind power project, which lacks transparency and is being pursued purely due to political intervention, is permitted to advance, the country will be locked in bankruptcy for a long time, paying for electricity in dollars.

They said in a news release that the project would also spell the end of Sri Lanka’s domestic renewable energy industry, and that remaining mute on such energy projects that would further damage our economy would be tantamount to usurping the rights of many future generations.

“First and foremost, we must consider the amount of foreign exchange that we as a country have lost as a result of this enterprise. We have learnt that a unit of electricity will cost USD 7.5 if the Adani project is accomplished. That is, the price paid by the Government for the Adani project is 100 per cent higher than the price paid by previous Governments. If Sri Lanka had to pay for this electricity in dollars over a 20-year period, it would lose nearly USD 3300 million in foreign exchange. The CEB has suffered USD 2000 million loss,” he alleged.

When questioned if the CEB is attempting to pay the Adani Group in US dollars, Ferdinando stated that no government or private entity has the legal authority to purchase electricity for USD 7.5. He stated that the financial balancing process is tedious and that each and every stage of the procedure would be approved by a group of engineers after obtaining the appropriate documentation in various phases.

“Electricity should be purchased in accordance with CEB Act 43 (4), (5), (6), and (7) for the best price. The Sri Lankan Public Utilities Commission will undoubtedly be in charge of this. No State official can afford to pay USD 7.5 for energy. We must keep in mind that this suggestion was made to the government by the Indian government,” he stated.

Role of AGEL

AGEL will pursue its proposed investment of the USD 442 million for implementation of the proposed project as set forth in the application submitted to the BOI under Section 17 of the BOI Law in accordance with the applicable law.

According to the MoU, AGEL is compelled to conduct a detailed feasibility study for the project at its own cost within a period of three months, while ensuring the requirements under the Sri Lanka Electricity Act No. 20 of 2009, National Environmental Authority Act No. 47 of 1980, Sri Lanka Sustainable Energy Authority Act No. 35 of 2007 are met and submitted for the feasibility study for the project to the other parties for their consideration and to decide further action in respect of the proposed project.

Upon signing of the MoU, AGEL will pursue feasibility studies with a view to finalising bankable Power Purchase Agreements (PPA), and the bankable Implementation Agreement (IA) towards which it is likely to spend in excess of USD 250,000, which it will remit within a fortnight and bring in subsequent additional funds as needed for progressing with the feasibility studies. AGEL will further invest funds upon signing of the PPA and financial closure, required for site development activities, importation of required machinery and equipment required for commissioning and for power generation and evacuation of power to the transmission network of the CEB and for other associated requirements including for transmission connection facilities, transformers and upgrading the grid connecting facilities if required and followed by other supplies and commissioning.     

Role of the GOSL Agencies

The GOSL Agencies will facilitate AGEL with respect to the implementation of the proposed project, within the provisions of the applicable laws and those sought by AGEL in its investment Application dated 18 January 2022.

The Secretary to the Treasury will be overseeing to facilitate through the Cabinet Appointment Management Committee on Investment (CAMCI) and to provide all facilities, approvals, directions for the successful implementation of the Proposed Project and its associated developments including consider granting tax or other concessions as permitted.

The Treasury will also facilitate to provide payment security mechanism through a bankable guarantee executed between the Secretary to the Treasury and the AGEL for all payments under the PPA.

Term

The Term of the MoU shall be for one year from the effective date. However, the MoU shall be governed and construed in accordance with the laws of the Democratic Socialist Republic of Sri Lanka.

What are the project’s dark sides?

Another negative side of this project, according to CEBEU, is the lack of a Sri Lankan native renewable entrepreneur or industrialist involved in its creation. The simultaneous takeover of our inherited resources on Sri Lanka’s geographical location by a huge global corporation leaves the wind power industry with no supply of energy for future expansion.

Local entrepreneurs will lose experience creating such projects, according to CEBEU, and local engineers will lose the opportunity to gain technical knowledge on these projects.

“We have no intention of commenting on the awful fate of 22 million Sri Lankans or the political catastrophe that has resulted from the global surge in the price of fossil fuels and a lack of funds to purchase them. However, this project, which aims to have a 500-megawatt capacity, will weaken our energy security even more. At the same time, the country’s USD reserves are depleted, and the country remains bankrupt. As a result, we are requesting that the Political Authority, the Ministry of Power and Energy, the CEB, and the Sustainable Energy Authority suspend the project’s progress immediately,” they said.

CEBEU further stressed that the project should be granted to the lowest bidder through a transparent tender in order to generate electricity from the infinite wind power accessible in the Mannar area.

“We have no objection to competing for such a tender with Adani. We would also like to point out that bidding for this 500 MW should be done in 50 or 100 MW increments so that local firms can participate. We also emphasise that if we do not comply with the above, we will not hesitate to take legal action,” he said.

BY Thameenah Razeek