CEB losses, poor policy raise risks for private energy investors in Sri Lanka

ECONOMYNEXT – Inadequate regulations prioritising renewable electricity generation and heavy losses in the state power utility raise the risks for private investments in Sri Lanka’s energy sector, a new Asian Development Bank report said.

Land acquisition for power projects is one of the biggest risks identified by investors, according to the report on public-private partnerships.

 “The absence of any policy or regulatory frameworks prioritizing the generation of renewable electricity over fossil fuel electricity makes investors unsure of the presence of a guaranteed market for renewable-generated electricity in Sri Lanka,” it said.

This is making investors reluctant to invest in the sector, the ADB said.

Private investors also face a government payment risk.

“Ceylon Electricity Board’s poor and deteriorating financial standing poses significant offtake risk for generators,” the report said.

Most investors cite acquiring land as the biggest challenge for any new business in Sri Lanka.

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The government owns about 80 percent of the land and state land for industrial use is usually allotted on a 50-year lease.

The ADM also said the lack of proper transmission and evacuation infrastructure is a serious barrier to investment for foreign institutional investors.

“This directly increases the risks for foreign institutional investors and compromises the steady returns that they require.”

(COLOMBO, 27 June, 2019)