Sri Lanka should renegotiate unfair private power deals

ECONOMYNEXT – Sri Lanka should renegotiate better terms for private power purchase (PPPs) agreements done at a time the ethnic war had increased risks for investors in the country, an official said.

“Some PPPs could have been done better,” Thilan Wijesinghe, chairman of the National Agency for Public-Private Partnership in the Ministry of Finance & Mass Media said.

“The country had a war risk premium then,” he said in response to a question on fairness in risk allocation in some of the PPPs negotiated during war-time.

These had allowed the private sector to recover costs and make profits from power plants on just capacity charges alone without any obligation to improve efficiency and cost.

Wijesinghe said that in 1996 he worked closely with the Ceylon Electricity Board in formulating Sri Lanka’s first private power purchase agreements.

“At that time every single PPP was done through an RFP (request for proposals) process. We did not have unsolicited proposals,” he told a recent forum.

Wijesinghe said that when peace dawned in the early 2000s after a ceasefire agreement, he realised government negotiators had not been well advised in putting clauses in the PPPs that covered peace-time operations.

“When the risk – return scenario changes there must be renegotiation,” Wijesinghe told the Energy Forum 2017 held by the Public Utilities Commission of Sri Lanka (PUCSL), the regulator. “These (PPPs) need to be renegotiated.”

Wijesinghe said he believed any agreement could be renegotiated, referring to how the government was able to renegotiate the ‘Port City’ reclamation project with China.

“I believe any contract can be renegotiated – it’s a matter of risk-reward assessment.”

Wijesinghe said Sri Lanka need to learn from the experiences of private sector entry into telecommunications and port terminal operations that had led to major improvements in efficiency.
(COLOMBO, December 11, 2017)


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