The Government’s decision to strike a deal with an American firm to develop a new Liquefied Natural Gas (LNG) Terminal off the coast of Colombo, with investments into the Yugadanavi Power Plant, located at Kelawarapitiya, and gas supply rights to the country’s power plants, has whipped up a fresh controversy.
The Yugadanavi Power Complex, which has been adding 300 MWs to the national grid since 2010, is slated to become the largest power plant in Sri Lanka by 2025 with the addition of another 700 MWs in several phases to generate a total of 1,000 MWs.
The diesel-fired Yugadanavi Power Station is configured to run on Natural Gas in combined cycle, but without other infrastructure such as storage facilities and a pipeline network for natural gas, it cannot be done at present. Four Government entities, namely the Treasury, the Lanka Electricity Company (Private) Limited (LECO), the Employees Provident Fund (EPF) and the Lanka Transformers Limited (LTL Holdings) currently own its shares.
The proposed project involves divesting the Treasury-held 40 percent ownership stake of the 310 MW-Yugadanavi Power Plant to the energy giant, New Fortress Energy Inc. of the United States (US), to build an offshore LNG receiving, storage and regasification terminal.
The Framework Agreement in this regard dates back to July, and building on that Agreement, the Government last week took a step forward and inked a ‘Definitive Agreement’ with the US-based energy firm. The Finance Ministry in a recent Cabinet Memorandum proposed to enter into a five-year LNG supply agreement with the same foreign company along with the transfer of shares.
Allaying doubts
Finance Minister Basil Rajapaksa has been taking pains to explain the grey areas of the project, outlining its overall benefit to the country, with the intention of pushing the deal through. Spelling out the nitty-gritty of the complex deal to those in the Government ranks, the Minister pointed out that this foreign investment into the West Coast Power (Private) Limited, the owner of the Yugadanavi Plant, would help reduce electricity tariffs by lowering the electricity generation cost, while bringing in much-needed dollars to the forex-starved country. He said, in line with the valuation provided by the Government Chief Valuer, the US-listed global energy infrastructure company has offered US$ 250 million for the 40 percent shares of the Yugadanavi Plant. He also elucidated on the environmental sustainability of the project.
The Opposition parties and several Trade Unions affiliated with the Ceylon Electricity Board (CEB) are, however, up in arms against the move, raising fears of a foreign monopoly in the country’s energy sector and the alienation of the country’s assets to a foreign party in an arbitrary manner.
 Prime Minister Mahinda Rajapaksa presiding over a Party Leaders’ Meeting of the ruling alliance.
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A number of coalition partners of the Government have also been vocal against the proposal, adding pressure to the Government. A Group of 10 Parties, teamed up as ‘G10’, led by Ministers Wimal Weerawansa, Udaya Gammanpila and Vasudeva Nanayakkara has been agitating within the Government demanding to revisit the proposal.
These Parties, which usually identify themselves with a nationalist line of thought and anti-imperialist views, are seen to be not comfortable with the idea of handing over a 40 percent stake of a centrepiece of the Sri Lankan baseload power capacity to a US firm along with gas supply rights to the country’s power plants. The Sri Lanka Freedom Party (SLFP) led by former President Maithripala Sirisena has also thrown its weight behind this group.
Upon his return from Italy, Prime Minister Mahinda Rajapaksa met with the Party Leaders of the ruling alliance at Temple Trees last Thursday to iron out disagreements surrounding the Yugadanavi–New Fortress Contract. The smaller parties are now waiting till President Gotabaya Rajapaksa returns to the country to have an audience with him to discuss the same.
In a similar development, the ‘G10’ grouping previously expressed their dissent on the proposal to develop the East Container Terminal (ECT) of the Colombo Port as a joint venture with private partners, primarily India’s Adani Group and a Japanese firm. Considering the many concerns raised by various stakeholders, the Government took a step back at that time and decided to develop and operate the Eastern quay retaining the full ownership of the Sri Lanka Ports Authority (SLPA).
Opposition agitates
The Government has plans to lessen the dependency on diesel power plants by converting them into LNG in the coming years. The New Fortress investment comes at a time the country is looking into the commercial viability of natural gas deposits discovered in the offshore Mannar basin. SLFP MP Chandima Weerakkody, who served as the Petroleum Resources Development Minister from 2015 to 2017, expressed concerns that the new LNG deal could push back local natural gas sourcing ambitions, while also revealing that his opposition to the Yugadanavi Project cost him his portfolio under the previous Government.
The Janatha Vimukthi Peramuna (JVP) which has been continuously keeping tabs on the Government’s energy deal with the US, alleged that the Project Contract was rushed through the Cabinet and finalized at midnight on September 17 with a representative of the relevant company, who flew back to the US on the same night. The JVP fumed that the controversial deal compromises the national security of the country, claiming that the US would ultimately hold sway in the country’s energy sector by the mere touch of a switch.
“This deal happened outside the stipulated tender procedure, while separate international tenders had already been floated for the construction of the pipeline and a Floating Storage Regasification Unit. We, in the JVP, will seek Court intervention against this deal,” JVP Leader Anura Kumara Dissanayake told the media.
Opposition Leader and Samagi Jana Balawegaya (SJB) Leader Sajith Premadasa, issuing a media statement last week, criticized the plans to hand over 40 percent stake of the Yugadanavi Plant to a foreign company, dubbing it as a “midnight betrayal.”
“Anybody who receives controlling power of energy in a small land like Sri Lanka will also receive power to manipulate that country’s governance. This Government is out of its senses to the level of not understanding this fact. The SJB will rally against this arbitrary decision of the Government while respecting the health guidelines in the wake of COVID-19,” he commented.
A group of SJB MPs including Chief Opposition Whip MP Lakshman Kiriella called on the Chief Prelates and senior Buddhist monks of the Asgiri and Malwathu Chapters on Monday to highlight the potential risks of the Government’s latest agreement with the New York-based energy firm.
Foreign investments or business ventures with foreign partners have always been a moot point in our country in the past few years, be it the Colombo Port City, the Millennium Challenge Corporation (MCC) Agreement, the Hambantota Port Development Project or the ECT Project. It is true that, such foreign ventures often come with strings attached given the contemporary geopolitical game of the world powers, which Sri Lanka can hardly escape.
However, foreign investments are vital for the country to resurrect its feeble and debt-ridden economy, and every little bit helps now more than ever as the economy has taken a severe beating due to the COVID-19 pandemic. It is an onerous duty of the Government of the day to tread with caution to reap the maximum benefit from the deals it has on the table, while negotiating to remove any unfavourable clauses through persistent discussions.
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