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New Fortress deal spurs debate in Sri Lanka

US- based New Fortress Energy, which has launched projects in Jamaica and is now seeking to craft new installation and supply agreements in Asia and Africa, recently signed a deal with the Sri Lankan Government which is causing controversy.

New Fortress Energy has executed a definitive agreement for its investment in West Coast Power (WCP) Limited, the owner of the 310-MW Yugadanavi Power Plant based in Kerawalapitiya, Sri Lanka, along with the rights to develop a new liquefied natural gas (LNG) terminal off the coast of Colombo.

As part of the transaction, New Fortress indicates that it will have gas supply rights to the Kerawalapitya Power Complex, where 310 MW of power is operational today and an additional 700MW scheduled to be built, of which 350MW is scheduled to be operational by 2023.

New Fortress is expected to acquire a 40 per cent ownership stake in WCP.

News reports state that New Fortress will initially provide the equivalent of an estimated 1.2 million gallons of LNG (~35,000 MMBtu) per day to Sri Lanka, with the expectation of significant growth as new power plants become operational.

Government and Opposition leaders have been reading words over the deal, with the former stating in one report that the New Fortress agreement offers a better deal for Sri Lanka than what the Ceylon Electricity Board (CEB) tender process offered, due to lower costs for regasification, terminal services, and lower quantities of gas than identified in the CEB tender, and by the pricing being pegged to the Henry Hub Index of the US.

But an Opposition spokesperson said that even though the New Fortress gas offer is cheaper than that of the CEB-floated tender, neither will reduce the CEB’s cost of generation.

RAJAPAKSA… the deal was beneficial to the country, as it would help reduce electricity tariffs while also bringing in US$250 million in foreign exchange to the country’s crisis-ridden foreign reserves,

He questioned if the CEB generation plan was in line to meet the Government’s policy of 70 per cent renewable electricity by 2030, adding that if the generation plan was not accurate, then it might lead to obtaining excessive stocks of LNG.

The Sri Lanka Freedom Party’s (SLFP) Government members had also voiced their concerns regarding the agreement.

Minister of Finance Basil Rajapaksa has explained to the governing party parliamentary group that the deal was beneficial to the country, as it would help reduce electricity tariffs while also bringing in $250 million in foreign exchange to the country’s crisis-ridden foreign reserves, it was noted.