- Australian investor fails to secure energy permit
- Investor struggles to pay Rs. 700 m for $ 1.7 m project
- Payment deadline lapsed end-April
- SLSEA halts project progression until permit is obtained
United Solar, the Australian investor behind the mega-scale floating solar power project slated for establishment at Poonakary Tank, Jaffna, has failed to procure the on-grid renewable energy permit mandated by Sri Lankan law.
As reliably learnt by The Sunday Morning, it has come to light that the investor, despite numerous reminders from the Sri Lanka Sustainable Energy Authority (SLSEA), is yet to make the required payment to obtain the permit.
The deadline for the payment of the required fee, set at nearly Rs. 700 million, as per Section 18(2)(a) of the SLSEA Act No.35 of 2007, elapsed on 30 April, it is learnt.
The project, worth a total of $ 1,727 million, aims to develop a mega-scale 700 MW solar power plant at the Poonakary Tank. As previously reported, the Australian investor was poised to inject the first tranche of $ 500 million before March this year.
The SLSEA issued provisional approval for the project’s implementation to United Solar Energy Sri Lanka (United Solar) on 17 August 2022. The Letter of Intent (LOI) was issued by the Ceylon Electricity Board (CEB) on 16 August 2023 and Cabinet approval was granted on 11 September 2023.
As previously confirmed by United Solar, a total funding requirement of $ 1,727 million has been arranged by the company, which said that it would be ready to commence the project’s construction work on-site in March.
The entire investment of $ 1,727 million was to be brought in as a 100% Foreign Direct Investment (FDI) within 12 months from the signing of the Power Purchase Agreement (PPA) with the CEB.
The Cabinet gave the greenlight to a proposal seeking to enter into a PPA with the Australia-based United Solar Group last December.
When contacted by The Sunday Morning, SLSEA Chairman Eng. Ranjith Sepala confirmed that the Australian investor was yet to pay the required sum of around Rs. 700 million to obtain the energy permit.
“Earlier, the payment was calculated for 100 MW and thereafter the project was expanded to 700 MW. Therefore, the required amount has to be paid. Until the payment is made, approval cannot be given to proceed with the project,” he stressed.
Eng. Sepala noted that the country needed security to permit projects of such a scale.
According to the SLSEA, upon fulfilment of all requirements outlined in the provisional approval, the Director General will present the application, along with the necessary documentation, to the next available meeting of the Project Approval Committee (PAC) for review.
Within a month of consideration, the PAC will deliberate and decide whether to grant or refuse the energy permit. All decisions made by the PAC will be duly recorded in a register designated for this purpose.
The energy permit remains valid for a duration of 20 years from the commencement of commercial operations of the project. Upon issuance of the energy permit, the status of the applicant’s transition to that of a developer commences, granting permission to undertake the development of a New Renewable Energy (NRE) project.
A two-year window is allocated to the developer for construction, starting from the date of the energy permit. Following the initial 20-year term, the permit may be extended for up to an additional 20 years, contingent upon the terms outlined in relevant PPAs or other governing guidelines at that time. Within one month from the issuance of the permit, a PPA must be executed for the sale of electricity to the grid.
According to the SLSEA, the one-time permit fee for issuing the energy permit for projects up to 10 MW is now Rs. 500,000 per MW of capacity. For projects exceeding 10 MW, the fee is Rs. 1 million per MW.
In addition to the permit fees, renewable energy power plant developers and operators are required to pay annual royalties determined by the minister based on the renewable energy resources utilised.
If a developer fails to complete the project within the allocated two-year construction period, the energy permit may be cancelled under Section 21(1)(a) of the act. The developer can request a review by submitting a payment and explanation to the SLSEA.
If satisfied, the Board of Management may grant an extension to fulfil the permit conditions and commence commercial operations. However, no such opportunity will be granted if the project conflicts with a significant national-level development, according to the SLSEA.
Meanwhile, a top CEB official raised concerns over the delay in making such an important payment to proceed with the project, while highlighting the urgency shown by the investor and the involvement of all high-level authorities to expedite the process.
“It has now been several months since the project was initially scheduled to commence. The local authorities have fulfilled their duties and there is no delay or issue from the Government side, as we all are waiting for the investor of such a big investment to submit their energy permit fee,” the official stressed.
When contacted by The Sunday Morning, Power and Energy Ministry Secretary Dr. Sulakshana Jayawardena stressed that the tariffs for the Poonakary project had been approved by the Cabinet last year.
“They were requested to pay and obtain a permit from the SLSEA. We have sent reminders to expedite the process,” he said.
When asked about the investor’s level of interest in the project, the Secretary said: “It seems they are still interested in the project.”