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Coal supplies: $ 100 m needed for speedy shipments

25 Sep 2022

  • CBSL to issue 30% of $ payment for 1st shipment this week
  • CEB yet to honour outstanding payments to LCC
By Maheesha Mudugamuwa   With the cancellation of the recently-awarded tender to purchase coal on credit, uncertainty looms over the securing of sufficient coal stocks to run the Lakvijaya Coal Power Plant in Norochcholai. The Sunday Morning learns that from the end of next October, the Government will need to source at least $ 100 million to make payments for five expedited coal shipments which were listed under a long-term procurement plan in 2021 and scheduled to commence from December 2022. According to Power and Energy Ministry sources, the Central Bank of Sri Lanka (CBSL) has promised the Lanka Coal Company (LCC) that it will release $ 6 million to pay for 30% of the total dollar payment as an initial payment tomorrow (26) for the first of the five vessels, but no payment plan has been scheduled for the remainder. Further, to obtain the required foreign exchange, the Ceylon Electricity Board (CEB) must make payments in rupees on behalf of the LCC, but as learnt by The Sunday Morning, the CEB too had not yet completed the rupee payments. The LCC expects that the CEB too will make payments starting from tomorrow (26). The contract worth $ 1.4 billion was recently awarded with Cabinet approval to Russia’s Suek AG/Black Sand Commodity, which offered $ 328.22 per MT (including freight charges) – the lowest bid to supply nearly 4.5 million MT of coal to Lakvijaya for three years on a six-month credit period.  However, last week, Power and Energy Minister Kanchana Wijesekara announced the cancellation of the coal tender awarded last month by the Cabinet on the request of the Ministry, as the selected supplier had communicated the inability to perform the tender, citing concerns on the impact on legal cases filed and payment guarantee risk. LCC General Manager (GM) Namal Hewage told The Sunday Morning that the LCC had secured five coal shipments immediately and would call for spot tendering and open tender for long-term procurement on Tuesday (27). “There are 19 shipments pending from last season (2021). We are expecting the first shipment on 25 October. For that, 30% of the payment will be made tomorrow and the rest of 70% before 25 October. The CBSL will initially release $ 6 million to purchase the first shipment. Out of the pending 19 shipments, we will be purchasing five immediately. In the meantime, we are calling for spot tendering and long-term procurement too,” he explained. “The existing coal stocks will be sufficient till 25 October and the new shipment carrying 60,000 MT of coal is expected on 25 October. The daily requirement is only 7,500 MT,” he added. The five shipments, which the LCC expects will arrive early, will be sufficient for approximately 40 days. Commenting on the new coal tender to be opened by the LCC, the GM stressed that the new tender would be an open tender that would enable any supplier around the world to submit bids. “Spot tenders will be for registered suppliers. The new tender too will seek a long-term credit facility,” he added. Lakvijaya provides nearly 900 MW of energy to the national grid, accounting for about 40% of the country’s total energy requirement. As a result of the cancellation, it is now expected that the country will once again plunge into hours-long power cuts from 25 October onwards, CEB engineers and the Public Utilities Commission of Sri Lanka (PUCSL) warned last week.   


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