Sri Lanka mulls risk guarantees for private energy investments
ECONOMYNEXT – The government is considering creating new financial instruments and risk guarantees to attract private sector investments in risky ventures in Sri Lanka’s energy sector, Harsha De Silva, Deputy Minister, Ministry of National Policies and Economic Affairs, said.
The government is forced to rely on private investments to increase generating capacity to meet growing demand for electricity as it does not have enough money to invest on its own, he said.
“We have to think about risk-adjusted capital instruments to boost the confidence of investors, particularly in our energy sector,” De Silva told the Energy Forum 2017 held by the Public Utilities Commission of Sri Lanka (PUCSL), the regulator.
There was a need to bring risk mitigation mechanisms to help attract the private sector to participate in the island’s energy sector.
“We must think of new instruments and risk guarantees for the private sector to invest in risky ventures in Sri Lanka’s energy sector,” De Silva said.
Financial instruments like options were available to mitigate risks in case the utility or independent power producer does not deliver.
De Silva also said partial risk guarantees were also available from multilateral lending agencies like the World Bank and Asian Development Bank.
“When an investor wants to make investments, some countries don’t deliver,” De Silva said. “There are credibility gaps. To plug them, multilateral organisations come in to help with partial risk guarantees.
(COLOMBO, October 27, 2017)