Colombo: Sri Lanka’s state-run electricity board and India’s biggest power producer, NTPC, on Tuesday signed an agreement to set up a coal-fired power plant joint venture worth up to $700 million in the island nation.
The Ceylon Electricity Board (CEB) and India’s state-run NTPC will invest at least $250 million each for the 500 MW coal power plant, Sri Lanka’s second after a Chinese funded 300 MW plant which is in the north western coastal district of Puttalam.
India also loaned $200 million under a concessionary term for Sri Lanka to build infrastructure related to the coal power plant, officials from the countries said.
“We have not yet come to the exact cost as yet, but it will be around $700 million,” NTPC chairman and managing director Arup Roy Choudhury told Reuters after signing the agreement.
However, Sri Lanka’s ministry of power and energy says the cost to be $500 million.
“Today we have signed the joint venture agreement for a $500 million, 500 MW coal power plant with the India’s NTPC,” said M. M. C. Ferdinado, secretary of Sri Lanka’s ministry of power and energy.
Both CEB and NTPC will invest 15% or $75 million each in equity capital and will finance the balance via loans including commercial borrowing.
The new power plant will be completed in two phases by 2017 in Sampoor, a village in the eastern port city of Trincomalee, where Tamil Tiger rebels had their military camps before they were wiped out from the east in 2007.
The two parties have also planned to expand the capacity to 1,000 MW in future.
Sri Lanka’s first coal fired power plant with 300 MW capacity was built under a $455 million loan from China’s Exim Bank and is expected to eventually expand to 900 MW. China has offered an $891 million loan to build the second phase.
India and China have been increasingly lending to Sri Lanka, mainly for infrastructure projects, since a civil war on the island nation ended in 2009, as the Asian giants and rivals compete for influence on the island, which sits right off one of the world’s biggest shipping routes.
India has committed $800 million under a credit line to Sri Lanka mainly for infrastructure projects and the latest $200 million loan for infrastructure related to the coal power plant will be in addition to the credit line.
India has already started $520 million worth infrastructure projects to rehabilitate railways, mainly in the war-hit northern region.