• Rs. 5 b shortfall delays plant commissioning

The commissioning of the 120 MW Uma Oya Power Plant has been delayed as the Ceylon Electricity Board has insufficient funds to pay for the remaining 1.7% of construction work needed for the completion of the project, The Sunday Morning learns. 

It is learnt that once commissioned, the power plant will contribute around 6% of the total hydropower generation capacity of Sri Lanka. However, it is reliably learnt that the project has been delayed due to the inability to source nearly Rs. 5 billion to pay for essential equipment, expertise, salaries, and materials for the completion of the project.

According to the CEB, the project was to be completed by 31 December 2022 but approval has been granted for its extension by the Cabinet of Ministers. Due to monetary issues of the project (especially foreign currency issues), the contractor submitted a new timeline to complete the project by May 2023, if cash flow requirements from the Government of Sri Lanka was assured uninterruptedly.

It was estimated at the end of last December that approximately $ 8 million would be required for the remaining work, including the arrival of commissioning staff at the site.

The current physical progress of the project is 98.3% and the financial progress is 97.3% (~$ 500 million). The Cabinet has directed to pay $ 38.612 million as claimed by the contractor – Farab Engineering from Iran – and for it to be borne by CEB; the CEB Board has granted approval for the same. 

Rs. 4,353 million pending

According to CEB statistics, as of 31 January 2023, there was a pending Rs. 4,353 million short term payable for Uma Oya and when The Sunday Morning checked with the CEB, it was learnt that the amount was still pending.

However, a senior official close to the subject told The Sunday Morning that the board was planning to pay the pending amount from the CEB and was awaiting the cash to come in from the recently increased electricity tariffs.

It is learnt that the CEB expected total cash flow from the increased tariff, which is expected to come in by April, and as highlighted by the senior official, the payments are most likely to be made after April. However, he was not in a position to reveal what the priorities would be. 

There is a total of Rs. 26,085 million pending as short-term payables, including payments for Uma Oya (Rs. 4,353 million), Lakvijaya Coal Power Plant (Rs. 5,912 million), Letters of Credit (Rs. 1,987 million), solar rooftop payables (Rs. 3,778 million), local supplier payables (Rs. 7,493 million), and repayment of loans (Rs. 2,562 million).

This is in addition to the total of Rs. 198,047 million owed by the CEB to its major creditors such as the Ceylon Petroleum Corporation (CPC), IPPs, and the Non-Conventional Renewable Energy (NCRE) sources.

However, as per the recently-approved electricity tariffs by the Public Utilities Commission of Sri Lanka (PUCSL), the CEB expects a 66% revenue enhancement for the estimated 14,920 GWh sales demand for 2023 (16,520 GWh gross generation requirement). Accordingly, the CEB’s budgeted expenditure is Rs. 722 billion, its revenue is Rs. 434 billion at the prevailing tariff, and the forecast revenue increase requirement is Rs. 287 billion (66%).

In such a backdrop, concerns have been raised as to whether the CEB will be able to connect Uma Oya to the national grid as recently assured by Power and Energy Minister Kanchana Wijesekera. 

For several years, many ministers and previous chairpersons of the board have assured that the project will be completed within a few months and added to the national grid but nothing has happened to date. The current administration of the board too is still struggling to secure funds to complete the project.

The power plant was earlier scheduled to be commissioned in 2021 but the construction of the project was delayed due to the Covid-19 pandemic hitting the country in 2020. It was later scheduled to be commissioned in 2022. However, foreign exchange issues have caused delays again.

Many expectations for Uma Oya

Uma Oya plays a major role in the power sector as it is expected to ease the burden on the CEB to fill the power shortage and to save millions of dollars that will be used to fill the gap by operating coal or other petroleum fuel power plants, the CEB stated earlier.

The project was to be commissioned in 2015 but was delayed due to a leak. The original agreement was signed in 2008, estimated to cost $ 529 million – $ 450 million from the Export Development Bank of Iran and the rest from Sri Lanka. Due to sanctions imposed by the US on Iran however, funding was affected and the Treasury had to take on around 80% of the financing. 

Iran’s Tehran-based Farab Co. is the EPC contractor of the Uma Oya multipurpose project, which is one of the largest projects for exporting technical and engineering services among Iranian companies. This project is implemented by the Ministry of Mahaweli Development and Environment.

As per the CEB’s Long-Term Generation Expansion Plan (LTGEP) approved by the PUCSL on Wednesday (1), the 122 MW Uma Oya hydropower plant, which is to be operated as a part of the Uma Oya multipurpose hydropower project, is expected to generate 290 GWh of energy annually.

As stated in the LTGEP, a pre-feasibility study on Uma Oya multipurpose project (a trans-basin option) was completed by the CEB in July 1991 where the diversion of Uma Oya, a tributary of Mahaweli Ganga, was studied.

In 2001, SNC Lavalin Inc. of Canada was engaged to conduct the feasibility study on Uma Oya with the assistance of Canadian International Development Agency (CIDA). However, only phase I of the study was completed by the consultants.

Uma Oya faces numerous obstacles

When contacted by The Sunday Morning, a senior CEB official who wished to remain anonymous stressed that the entire Uma Oya project had been facing numerous obstacles during the past several years, since the construction work commenced.

“It is mainly not handled by the CEB. It is handled by the Irrigation Department. There are no issues with regard to the power plant per se but there are several commercial issues,” the official said.

“Earlier, the project was to be built by a UK consortium but since Iranian funding came in, the project was given to Iran. However, this is now like a Sri Lanka-funded project as the major portion is contributed by the Treasury – nearly 80%,” the official stressed.

Per the LTGEP, the Uma Oya hydropower project is one of the largest remaining sites of hydro potential. The project is a multipurpose development project and it will transfer water from Uma Oya to Kirindi Oya in order to develop hydropower and to irrigate the dry and less developed south-eastern region of the central highlands.

Accordingly, two small reservoirs are to be built close to Welimada where the water from these two reservoirs will be diverted through a tunnel to the underground powerhouse located at Randenigala, near Wellawaya.

When contacted, CEB Spokesman Additional General Manager (Generation Division) Dhammika Navaratne said the construction work of the tunnel that runs to the underground powerhouse located at Randenigala near Wellawaya was ongoing and it was expected to be completed within the next few months.

“The contractor has already conducted dry commissioning of the power plant and the CEB is to witness both dry and wet commissioning of the power plant prior to its launch for generation purposes. This dry commissioning will be conducted within another few months, once the ongoing construction work is completed,” he added.

When contacted, CEB Chairman Nalinda Ilangakoon said he was planning to make the pending payment of nearly Rs. 5 billion due from the CEB. “The power plant will be ready by the middle of this year. We are taking necessary steps to expedite the ongoing construction work,” he added.