23 August, 2011

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.

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.

The $500 million (around Rs.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.

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.