Patriotism, Economy & Yugadanavi Power Plant

By Harsha Gunasena –NOVEMBER 4, 2021

Harsha Gunasena

Eleven constituent parties of the government have staged a protest against the government under the banner Mahajana Manthrana Sabhava-MMS (Peoples Council). This in fact is not a people’s council rather a council of frustrated politicians since there were no people involved there. MMS came into the limelight with the real participation of the people during the former autocratic regime of Mahinda Rajapaksa where the opposition had no say.

What they say is that they are against the agreement with respect to the Yugadanavi Power Plant reached by the government with the US company, New Fortress Energy (NFE), a liquefied natural gas (LNG) company founded in 2014. The trade unions of the Ceylon Electricity Board (CEB) along with affiliated trade unions are also taking the same stance and planning to stage a major protest including a blackout.

Yugadanavi power plant, which is having a capacity of 300MW, was constructed by Lanka Transformers Limited (LTL- a joint venture between CEB and Bonar Long of Scotland) and owned by West Coast Power (pvt) Ltd of which the owners are, the treasury (51%), EPF (27%) Lanka Electricity Company -LECO (18%) and LTL (4%). When Yugadanavi was completed in 2010 the intention was to use LNG but since the inception the plant was using diesel. In the past neither the CEB nor the government took successful initiatives to use LNG in this plant.

There are several advantages of using LNG against diesel. LNG burns efficiently which is highest energy content fossil fuel. LNG burns cleanly, it has lower maintenance costs and low emissions of carbon dioxide and other greenhouse gases. LNG is attractively priced which means more power for the same money. In order to liquidize the gas, it has to be brought under minus 160 degrees Celsius. There are special storage facilities in the ships to transport this.

The Government signed the agreement in July with NFE. It was signed at midnight without getting proper approval from the Cabinet of Ministers. According to the agreement NFE will built a floating storage in the sea to store LNG and they also will build a pipeline to transfer LNG in the form of a gas from that storage to Yugadanavi. In turn it is mandatory that the government should buy gas 35 trillion BTUs (British Thermal Units) per year. Even if the government does not buy gas to that extent the payment should be made. The capacity of Yugadanavi is only 15 trillion BTUs. Therefore, the government will have to pay NFE for the additional unused 20 trillion BTUs which would amount to around USD 215 million per year. Even if the new power plant under construction in Keravalapitiya is completed the government will have to pay around USD 90 million to NFE for unused BTUs.

This minimum buying quantity is fixed since probably otherwise it would be uneconomical to maintain a floating storage and a pipeline for NFE. Therefore, in order to reduce the losses, the government will have to build an additional pipeline to Kelanitissa as well. Moreover, when there is heavy rains and hydropower stations are running in full capacity the intake may have to be reduced from these LNG power plants since Norochchole coal power plant cannot be stopped. The government also agreed to sell 40% stake of West Coast Power (pvt)Ltd which owns Yugadanavi to NFE for USD 250 million. When the agreement was signed CEB has already called for tenders for the floating storage and the pipeline.

All so-called patriots including the unions of CEB are against mainly for this 40% sale. Even if a company is selected from the tender procedure the monopoly of supplying LNG should have been given to that company because the country does not have the capacity to have several floating storages. If this company were a Chinese company these patriots probably would have agreed to it. Their problem is that the monopoly of supplying LNG to the country is vested with an American company. However, the main issue is neither 40% sale nor the monopoly given to NFE but the unfavorable condition to buy over the requirement LNG of the country. If the arrangements can be done to fix that by increasing the usage enabling Kelanitissa as well to use LNG the agreement can be converted to an advantageous one.

Not following the tender procedure and not informing the cabinet were major flows. Previously, the contract of developing the Port City was granted based on an unsolicited bid submitted by China Communications Construction Company Ltd.in 2013. Thereafter the then government did not follow the Public Procurement Guidelines and called for other interested parties to bid for the project whilst offering a first right of refusal to the original proposer. This issue was not raised sufficiently at that time by the persons who opposed the agreement and the main opposition at that time was to the environmental issues. However, following a wrong procedure in one instance does not justify following the same for other instances as well.

When running an economy especially at this juncture giving too much priority for this silly type of patriotism is a menace. When the government tried to sell less than 50% stake of the Eastern Container Terminal (ECT) of Colombo Port to Indian and Japanese companies based on an agreement reached by the previous government there was a stringent protest from the trade unions who kept mum when 85% of Colombo International Container Terminal (CICT) was given to a Chinese company by the previous Mahinda Rajapaksa government. As a result, the government gave 85% of Western Container Terminal (WCT) which is well above 50%, to an Indian company to which the trade unions were in agreement. Now the government does not have funds to develop the ECT. This time also the trade unions of CEB has threatened that they would take strong trade union action if the government would not move out from this agreement.

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