Differences over pact between NTPC, CEB may delay 500-cr proj

Operation, maintainence cost, return on investment among major issues over which the two companies continue to have differences

Serious differences have cropped up between NTPC and Ceylon Electricity Board (CEB) over setting up of a 500-MW power plant in Sri Lanka, which is expected to further delay implementation of the project.

Operation and maintenance (O&M) costs and return on investment are among the major issues over which the two companies continue to have differences, sources said.

A source in the know said that CEB wants to change certain terms that have already been agreed upon by the two companies.

"Issues (related to the project) are yet to be resolved," the source said.

According to sources, CEB has sought changes regarding return on investment and O&M costs, besides the heat rate of the coal-fired project.

Considering the slow progress in development of the project, NTPC is believed to be even looking to bring back its senior executives stationed in Sri Lanka for the plant, sources said.

The project is seen as a milestone in the bilateral economic cooperation between India and Sri Lanka.

The 500-MW project at Trincomalee is to be implemented by an equal joint venture company of NTPC and CEB. The agreement for the joint venture was inked in late 2011.

However, persisting differences are likely to delay the project, which is expected to go on stream by 2016.

In a communication to the CEB on January 15, NTPC said that "in our mutual interest, we should not reopen any of the settled issues".

"NTPC and CEB should now sign the PPA and other agreements to proceed for project development without further delay," the communication said.

The draft Power Purchase Agreement (PPA) was finalised with CEB in 2011 after prolonged discussions on all issues, it said.

Among others, CEB recently has sought to reduce the return on equity investment to 12 per cent from 18 per cent as per the PPA initialled in February, 2011.

Electricity generated from the proposed 2x250 MW plant would be supplied to CEB. Coal for the project would be imported and supplied by Lanka Coal Company (LCC), while land would be given by the Sri Lankan government on a long term lease.

NTPC, which is India's largest power producer, has an installed generation capacity of 39,674 MW.