State-run power utility NTPC Ltd's first overseas project, a 500MW plant to be built in Sri Lanka, may finally see the light of the day with all pending issues being resolved.
The joint venture agreement (JVA) between India's largest power generation utility and Sri Lanka's Ceylon Electricity Board (CEB) is set to be signed during the upcoming visit of an Indian delegation headed by power secretary P. Uma Shankar. The draft implementation agreement was signed about two weeks ago.
“We will be signing the agreements shortly. All issues have been resolved,“ said NTPC chairman and managing director Arup Roy Choudhury.
Shankar also confirmed the development.
India is seeking to engage more closely with Sri Lanka politically and economically at a time when China is becoming increasingly influential in that country.
Sri Lanka had awarded a 300MW coal-fired plant in 2006 to China National Machinery Import and Export Corp., prompting the Indian government to nudge NTPC into hastening the process. The project has been delayed by at least five years due to NTPC's financial disagreements with its foreign partner and Tamil separatist strife.
“We will be signing the agreement shortly. An Indian delegation is slated to leave for Sri Lanka shortly. The dates are to be finalized. Every pending issue has been sorted out", said Palitha Ganegoda, Sri Lanka's deputy high commissioner to India.
While CEB had earlier demanded that the Indian government offer a guarantee for the funds it has sought, as well as provide a return on equity during construction, NTPC had asked for a counter guarantee from the Sri Lankan government for the power offtake.
There was no information available on how the differences were resolved.
The $500 million (around `2,250 crore) power project is to be set up as an equal joint venture between NTPC and CEB on a build, operate, own and transfer basis and a debt to equity ratio of 70:30. Located north of Trincomalee, the plant is expected to boost generation in the island nation, which has an acute shortage. It has a power generation capacity of 2,500MW, compared with India's 180,000MW.
“We have initialled the text of the implementation agreement and...we plan to sign the JVA in the first week of next month,“ said another NTPC executive aware of the development who did not want to be identified. After that the joint venture “will be incorporated in Sri Lanka and will sign a power purchase agreement with CEB. After that the implementation agreement will be signed in late September".
Once the joint venture is set up, CEB will choose the chairman and NTPC the managing director for a period of eight years. There will be a rotation in positions every three years after that. The plant will use around 2.5 mil- lion tonnes of coal a year, which may be sourced from Australia and Indonesia.
Another Indian public sector unit, Power Grid Corp. of India Ltd (PGCIL), plans to set up an electricity transmission link between India and Sri Lanka, of which 30km will be under the sea. The India-Sri Lanka link will run from Madurai in Tamil Nadu to Anuradhapura in Sri Lanka's north-central province. The project plans to supply 1,000MW power to Sri Lanka.
NTPC had signed an agreement with CEB and the Sri Lankan government in December 2006 but other associated accords were kept pending.
The project was initially expected to start generating power in 2011.
The project was initially expected to start generating power in 2011.