NTPC, Sri Lankan partner disagree over payment  guarantee

NTPC, Sri Lankan partner disagree over payment  guarantee

New Delhi: Differences have arisen between India’s largest power generation company NTPC Ltd and Sri Lanka’s Ceylon Electricity Board, or CEB, over payment of security and sovereign guarantee on a proposed 500MW joint venture coal-based thermal power plant in Sri Lanka.

The project has been planned as an equal venture with the CEB, involving an investment of $500 million (Rs2,490 crore).

A senior NTPC executive said the company wanted the project’s chief financial officer, from the state-owned Indian utility, to preside over any situation involving a default on the part of CEB. Speaking on condition of anonymity, the executive said CEB, on the other hand, wants such an eventuality to be handled by the board.

“Since they (CEB) will have an equal representation on the board, it will never be able to approve it," said the executive, who did not want to be identified because of the sensitivity of the issue.

CEB officials could not be contacted for comment.

Sri Lanka has a power generation capacity of 2,500MW, against India’s capacity of 145,000MW. The NTPC plant in north of Trincomalee is expected to significantly enhance power generation in the island nation.

“There are some issues regarding the joint venture agreement. This is normal. Our team is already there to resolve the issue. The matter will also be taken at the government-to-government level," the NTPC executive said.

R.S. Sharma, chairman and managing director, NTPC, however, denied any problems. “We want to finalize the agreement by December this year."

A senior official in the ministry of power confirmed the differences over the pact: “Ceylon Electricity Board has certain reservations. We are trying to work on it and resolve the issues." He also didn’t want to be identified.

The Sri Lankan project is seen by NTPC as an effort to demonstrate its ability to set up power projects in other countries. Also, the company has set itself an ambitious target of increasing its power generation capacity to 50,000 MW by 2012 against the present capacity of 29,144 MW.

Analysts, however, feel that even if the project is halted because of the differences, it wouldn’t dent NTPC’s expansion plans in a significant way. “Considering the expansion plans of NTPC and its current capacity, 500 MW is too small a capacity to impact its expansion," said Madanagopal, an equity research analyst at Mumbai-based Centrum Broking Pvt. Ltd, who prefers to use one name.