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Poonakary solar project: Australian investors to infuse $ 500 m by March

Poonakary solar project: Australian investors to infuse $ 500 m by March

18 Nov 2023 | By Maheesha Mudugamuwa

Australian investors are poised to inject the first tranche of $ 500 million into the controversial solar project slated for launch in Poonakary, Jaffna. As reliably learnt by The Sunday Morning, this substantial investment is expected to materialise before March next year.

The total investment value is $ 1,727 million, aimed at developing a mega-scale 700 MW solar power plant at the Poonakary Tank. 

It is also learnt that the Sri Lanka Sustainable Energy Authority (SLSEA) has already issued provisional approval for the project’s implementation to United Solar Energy SL Ltd. (United Solar) on 17 August 2022. 

The Letter of Intent (LOI) was issued by the Ceylon Electricity Board (CEB) on 16 August and Cabinet approval was granted on 11 September.

This project is expected to generate and supply about 1,100 GWh of electricity to the national grid annually, meeting approximately 6.5% of Sri Lanka’s annual electricity demand.

However, as learnt by The Sunday Morning, a new transmission line must be constructed in order to connect the plant to the grid. 

It is learnt that the Indian investor Adani will construct the 21 km-long, 220 kV transmission line from Poonakary to Kilinochchi to generate and supply 1,100 GWh of fully dispatchable electricity annually to the national grid. The Environmental Impact Assessment (EIA) for the project is currently underway.

United Solar, an Australian company, is said to have requested environmental approval from the Central Environment Authority (CEA) and investment approval from the Board of Investment (BOI) to commence the implementation of the project in March 2024. 

United Solar has confirmed that the total funding requirement of $ 1,727 million has been arranged, and plans to commence project construction work on-site in March 2024. 

The entire investment of $ 1,727 million will be brought in as 100% Foreign Direct Investment (FDI) within 12 months from the signing of the Power Purchase Agreement (PPA) with the CEB. Discussions are ongoing between the CEB and United Solar to finalise the PPA.

According to statistics revealed to The Sunday Morning by United Solar, the estimated savings on foreign exchange for importing thermal oil to generate 1,100 GWh of electricity annually is expected to be $ 396 million, based on current thermal oil prices (at a rate of $ 0.36 per kWh). The estimated total foreign exchange savings for a period of 20 years amount to $ 7,920 million.

Therefore, the company observed that the total net foreign exchange savings from this project for the Government was over $ 3,300 million over a 20-year period or $ 165 million per year. The thermal oil price is expected to increase over the 20-year period, while the solar price will be fixed for 20 years.

The company confirmed that the Northern Provincial Council and the Northern Province Irrigation Department had agreed to its proposal to rehabilitate the Poonakary Tank at no cost to the Government. 

They will release 1,080-1,200 acres of shallow areas of this tank for the installation of a 700 MWp solar plant on a 35-year lease in exchange for rehabilitation work at a cost of about $ 13.5 million. The USG-S Consortium will maintain the tank and barrages/sluice gates/spillways at its own cost for 35 years, as requested by the Northern Provincial Council.

As confirmed by the company, this project is expected to be implemented immediately upon the signing of the PPA and is expected to be completed within two years.

Speaking to The Sunday Morning, CEB Chairman Nalinda Ilangakoon emphasised that the PPA had not been finalised, and that the unit cost would be determined by the CEB based on the discussions carried out with the investors, taking into account market demands and costs. He assured that the CEB was committed to preventing excessively high costs. 

Ilangakoon reiterated the significance of welcoming investors willing to contribute to the solar sector, provided they underwent a comprehensive examination to meet the anticipated renewable energy demands by the end of 2030.


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