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Sunday May 26th, 2024

Sri Lanka could face long power cuts, water shortages, Southern grid failures

PARCHED: Hydro reservoirs are down and the bottom is exposed.

ECONOMYNEX T- Sri Lanka could face multi-hour power cuts, blackouts in large parts of the grid and water shortages in Colombo if the current policy of avoiding one hour load shedding at any cost is continued, industry watchers familiar with the ground situation have warned.

Sri Lanka Ceylon Electricity Board has sought permission for around hour power cuts to conserve water in the drought period of February and March after a coal plant outage was compounded by liquid fuel shortages.

Without Samanalawewa the 132kV grid of the CEB which serves the highly populated Southern grid faces serious power deficit. The CEB is also running short of water at Kotmale and Victoria which is used to maintain the frequency of the grid at 50 cycles.

Sri Lanka is facing forex shortages due to money printing which made it difficult to suddenly import extra fuel when the coal plant broke down.

Sri Lanka’s political authorities as well as the regulator have denied permission for one hour planned cuts.

Water Crisis

Avoiding one hour power cuts is leading to further severe depletion of water storage.

Industry analysts say it is no longer practical to continue to run down hydro reservoirs to avoid planned load shedding.

Petroleum Minister Udaya Gammanpila had warned of 3 to 4 hour power cuts from late March.

“What the minister said is correct,” an industry official familiar with the situation said. “This can happen and also water to Ambatale pumping station in the Kelani River will be reduced and Colombo could face water cuts. It will be especially bad if the usual April inter-monsoonal showers are delayed.”

“I do not think the President has been properly made aware of this.”

In order to ensure water supply to Colombo, the Ceylon Electricity Board stores water in the Moussakelle reservoir in the Maskeli Oya and Castlereigh in Kehelgamu Oya, the two largest tributaries in the upper reaches of the Kelani River.

The water is then systematically used during the dry season to generate power, allowing Colombo to be supplied water in March and April until the showers return.

Moussakelle storage has already depleted to around half its capacity and Castlereigh to 30 percent.

Based on the current usage to avoid power cuts at any cost, Castlerigh Reservoir is expected to run dry (minimum operating level) by the end of February. Moussakelle will reach minimum operating level by end March.

With minimal rains, Kelani River water levels will fall to low levels without water from the two reservoirs.

Other reservoirs such as Laxapana and Canyon are small ponds with no storage.

The CEB generally operates a priorty of drinking water first, irrigation second and their own power the third, industry officials said. It has now been turned upside down under in the bid to avoid power cuts at any cost, which is increasingly looking like a gamble with the wrong odds.

However to avoid power cuts, water has been released which would have been better left for farming.

The CEB has also not renewed the ACE Matara and ACE Embilipitiya private plants.

There is also heavy opposition to renewing existing plants in times where there are no emergencies, forcing the CEB to buy power at high prices at the last minute when the bargaining power of the owners are high even if competitive tenders are called.

Perfect Storm

In two other serious complications, water in the Victoria and Kotmale reservoirs which are used to match generation to demand and keep the frequency of the grid at 50 hertz is also running dry.

Samanala Wewa is expected to reach minimum operating level by the second week of March and its use has to be stopped immediately according to industry analysts.

The lack of Samanalawewa, which is complex problem involving the CEBs 220kV and 132kv transmission line interconnections.

Without Samanalawewa the 132kV grid of the CEB which serves the highly populated Southern grid faces serious power deficit.

Most of the larger generators in the CEB system are connected to the 220kV system.

Some of the most expensive plants which are expected to be used only for peaking are connected to the 132kv system.

Overloading of the 132kV system could result in tripping of sections of the grid, tripping of generators including coal power plants which would lead to blackouts in sections of the grid or cascading failures.

The CEB has called tenders and are building interconnection as demand grew, but Covid and other factors have also delayed some projects.

Due to the complexities technicalities of running a national power grid as well as fears of running afoul of authorities, CEB officials are often at a loss to explain to the public exactly what the problem.

The CEB has also got down in infighting amid the New Fortress Energy deal and an internal Power Crisis Committee which usually meets and takes decisions ahead of time in other years has also not met for many months, sources said.

Most of the problems in Sri Lanka’s power sector stems from not building plants planned in the long term generation expansion plan in time, sometime due to political or other opposition as well as tender benders, critics say.

The current situation had long been predicted by analysts and the CEB as soon as the Trico plant was scuttled and the tender for the dual fuel plant was delayed. Power shortages were predicted from 2018 onwards in the dry season.

However the Covid crisis delayed demand growth.


Sri Lanka consumers warned on impending ‘electric shock’ after coal plant scrapping

Sri Lanka faces power shortage with coal plant delay

The forex and fuel shortages have also been predicted due to increasingly discretionary aggressive monetary policy that intensified after the end of a 30-year war. (Colombo/Feb12/2022)

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Sri Lanka power outages from falling trees worsened by unfilled vacancies: CEB union

HEAVY WINDS: Heavy rains and gusting winds have brought down trees on many location in Sri Lanka.

ECONOMYNEXT – Sri Lanka’s power grid has been hit by 300,000 outages as heavy winds brought down trees, restoring supply has been delayed by unfilled vacancies of breakdown staff, a union statement said.

Despite electricity being declared an essential service, vacancies have not been filled, the CEB Engineers Union said.

“In this already challenging situation, the Acting General Manager of CEB issued a circular on May 21, 2024, abolishing several essential service positions, including the Maintenance Electrical Engineer in the Area Engineer Offices, Construction Units, and Distribution Maintenance Units,” the Union said.

“This decision, made without any scientific basis, significantly reduces our capacity to provide adequate services to the public during this emergency.

“On behalf of all the staff of CEB, we express our deep regret for the inconvenience caused to our valued customers.”

High winds had rains have brought down trees across power lines and transformers, the statement said.

In the past few day over 300,000 power outages have been reported nationwide, with some areas experiencing over 30,000 outages within an hour.

“Our limited technical staff at the Ceylon Electricity Board (CEB) are making extraordinary efforts to restore power as quickly as possible,” the union said.

“We deeply regret that due to the high volume of calls, there are times when we are unable to respond to all customer inquiries.

“We kindly ask consumers to support our restoration teams and to report any fallen live electrical wires or devices to the Electricity Board immediately without attempting to handle them.

The union said there were not enough workers to restore power quickly when such a large volume of breakdowns happens.

“We want to clarify that the additional groups mentioned by the minister have not yet been received by the CEB,” the union said.

“Despite the government’s designation of electricity as an essential service, neither the government, the minister in charge, nor the CEB board of directors have taken adequate steps to fill the relevant vacancies or retain current employees.

“We believe they should be held directly responsible for the delays in addressing the power outages due to the shortage of staff.”

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Melco’s Nuwa hotel to open in Sri Lanka in mid-2025

ECONOMYNEXT – A Nuwa branded hotel run by Melco Resorts and Entertainment linked to their gaming operation in Colombo will open in mid 2025, its Sri Lanka partner John Keells Holdings said.

The group’s integrated resort is being re-branded as a ‘City of Dreams’, a brand of Melco.

The resort will have a 687-room Cinnamon Life hotel and the Nuwa hotel described as “ultra-high end”.

“The 113-key exclusive hotel, situated on the top five floors of the integrated resort, will be managed by Melco under its ultra high-end luxury-standard hotel brand ‘Nuwa’, which has presence in Macau and the Philippines,” JKH told shareholders in the annual report.

“Melco’s ultra high-end luxury-standard hotel and casino, together with its global brand and footprint, will strongly complement the MICE, entertainment, shopping, dining and leisure offerings in the ‘City of Dreams Sri Lanka’ integrated resort, establishing it as a one-of-a-kind destination in South Asia and the region.”

Melco is investing 125 million dollars in fitting out its casino.

“The collaboration with Melco, including access to the technical, marketing, branding and loyalty programmes, expertise and governance structures, will be a boost for not only the integrated resort of the Group but a strong show of confidence in the tourism potential of the country,” JKH said.

The Cinnamon Life hotel has already started marketing.

Related Sri Lanka’s Cinnamon Life begins marketing, accepts bookings


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Sri Lanka to find investors by ‘competitive system’ after revoking plantations privatizations

ECONOMYNEXT – Sri Lanka will revoke the privatization of plantation companies that do not pay government dictated wages, by cancelling land leases and find new investors under a ‘competitive system’, State Minister for Finance Ranjith Siyambalapitiya has said.

Sri Lanka privatized the ownership of 22 plantations companies in the 1990s through long term leases after initially giving only management to private firms.

Management companies that made profits (mostly those with more rubber) were given the firms under a valuation and those that made losses (mostly ones with more tea) were sold on the stock market.

The privatized firms then made annual lease payments and paid taxes when profits were made.

In 2024 the government decreed a wage hike announced a mandated wage after President Ranil Wickremesinghe made the announcement in the presence of several politicians representing plantations workers.

The land leases of privatized plantations, which do not pay the mandated wages would be cancelled, Minister Siyambalapitiya was quoted as saying at a ceremony in Deraniyagala.

The re-expropriated plantations would be given to new investors through “special transparency”

The new ‘privatization’ will be done in a ‘competitive process’ taking into account export orientation, worker welfare, infrastructure, new technology, Minister Siyambalapitiya said.

It is not clear whether paying government-dictated wages was a clause in the privatization agreement.

Then President J R Jayewardene put constitutional guarantee against expropriation as the original nationalization of foreign and domestic owned companies were blamed for Sri Lanka becoming a backward nation after getting independence with indicators ‘only behind Japan’ according to many commentators.

However, in 2011 a series of companies were expropriation without recourse to judicial review, again delivering a blow to the country’s investment framework.

Ironically plantations that were privatized in the 1990s were in the original wave of nationalizations.

Minister Bandula Gunawardana said the cabinet approval had been given to set up a committee to examine wage and cancel the leases of plantations that were unable to pay the dictated wages.


Sri Lanka state interference in plantation wages escalates into land grab threat

From the time the firms were privatized unions and the companies had bargained through collective agreements, striking in some cases as macro-economists printed money and triggered high inflation.

Under President Gotabaya, mandating wages through gazettes began in January 2020, and the wage bargaining process was put aside.

Sri Lanka’s macro-economists advising President Rajapaksa the printed money and triggered a collapse of the rupee from 184 to 370 to the US dollar from 2020 to 2020 in the course of targeting ‘potential output’ which was taught by the International Monetary Fund.

In 2024, the current central bank governor had allowed the exchange rate to appreciate to 300 to the US dollar, amid deflationary policy, recouping some of the lost wages of plantations workers.

The plantations have not given an official increase to account for what macro-economists did to the unit of account of their wages. With salaries under ‘wages boards’ from the 2020 through gazettes, neither employees not workers have engaged in the traditional wage negotiations.

The threat to re-exproriate plantations is coming as the government is trying to privatize several state enterprises, including SriLankan Airlines.

It is not clear now the impending reversal of plantations privatization will affect the prices of bids by investors for upcoming privatizations.

The firms were privatized to stop monthly transfers from the Treasury to pay salaries under state ownership. (Colombo/May25/2024)

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