ECONOMYNEXT – US-based New Fortress Energy (NFE) said it had signed a framework agreement with Sri Lanka’s finance ministry to build a floating liquefied natural gas terminal, and was also in talks to buy a thermal plant.
“According to the Sri Lankan authorities, NFE’s investments are in line with the Government policy of accelerating the transition to cleaner and cheaper energy sources and signify that the Country is open to investments and business,” the firm said in a statement.
“As part of the Agreement, the Government will facilitate the obtainment of necessary permits and entitlements by New Fortress to construct the LNG terminal. The Terminal is expected to begin operations by the second half of 2022.”
“The Terminal will be located off the coast of Colombo to supply gas to the country’s power plants, primarily located in the Kerawalapitiya Power Complex.
Sri Lanka had earlier called international competitive bids to procure Floating Storage Re-gassification Unit (FSRU), on a 10-year Build Operate Own (BOO) basis.
Bids for a pipeline was called on a Build Operate Transfer (BOT) basis which will go Sri Lanka at the end of the contract.
Gas supply was to be separately procured by the state at market prices on long term and spot mix to be decided.
However with the tender already called there were reports that negotiations were under-way with another company to build the FSRU triggering a controversy.
Though more than a dozen firms collected tender documents, there were only a few responses, energy industry sources asid.
It is not clear on what terms the FRSU is to be built and whether Sri Lanka has to make any take-or-pay commitments to finance it.
The last administration also tried to foist take-or-pay LNG deals on state-run Ceylon Electricity Board with third party fuel procurement which were fiercely resisted.
NFE said it will also supply gas to a 300MegaWatt combined cycle plant which is now running on furnace and was it talks to buy a 40 percent stake held by the government.
The 300MW Yugadanavi plant was funded by state linked entities including Employees Provident Fund but it has an operations and maintenance (O&M) agreement with Sri Lanka’s LTL group, which has a smaller stake.
“As part of the Agreement, New Fortress will supply natural gas to the existing 300 MW Yugadanavi Power Plant and is negotiating the purchase of the Government’s 40% stake in the company that owns the power plant,” NFE said.
“This power plant is currently under a long-term power purchase agreement (PPA) to provide electricity to the national grid that extends through 2035. The plant consists of General Electric turbines and was configured to run on natural gas in combined cycle.
“The purchase of the Government’s interest in the company owning the power plant is subject to final documentation and the parties will work together to finalize their commercial agreements,” the statement said.
“New Fortress signed the Agreement with the Secretary to the Treasury and the Ministry of Finance.”