VZCZCXRO4982
PP RUEHLMC
DE RUEHLM #0610 1141235
ZNR UUUUU ZZH
P 241235Z APR 07 ZDK
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC PRIORITY 5911
INFO RUCPDOC/USDOC WASHDC
RUEHCG/AMCONSUL CHENNAI 7609
RUEHNE/AMEMBASSY NEW DELHI 0885
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION

UNCLAS COLOMBO 000610 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
STATE FOR SCA/INS, EB/IFD/ODF, AND EB/CBA TIM GILMAN 
COMMERCE FOR BRYAN LOPP AND EROL YESIN 
MCC FOR D NASSIRY 
STATE PLEASE PASS TO EXIM BANK 
 
E.O 12958: N/A 
TAGS: EINV ENRG ETRD PREL CE
SUBJECT: SRI LANKA: GE TURBINES PART OF $90M U.S. CONTENT IN 
KERAWALAPITIYA POWER PLANT 
 
REF: A) 2006 COLOMBO 1589, B) 2006 COLOMBO 1425 
 
¶1.  SUMMARY:  Negotiations continue between the Government of Sri 
Lanka (GSL) and Lakdhanavi Private Limited (Lakdhanavi) for a 300 
megawatt power plant in Kerawalapitiya described in reftels.  The 
project plan anticipates that the Export Import Bank will provide 
guarantees and insurance for suppliers for this project, which will 
include around USD 90 million in US content.  Plans initially called 
for a September 2008 completion date.  However, the GSL now urges 
that the plant begin operations in late July 2008 due to anticipated 
power shortages, which can be partially alleviated with the earlier 
plant activation.  This urgency increases the importance of timely 
ExIm Bank project approval.  END SUMMARY. 
 
¶2.  (SBU) Sri Lankan company West Coast Power will build a 300 
megawatt combined cycle power plant using U.S. content valued at 
about $90 million.  West Coast will procure turbines from General 
Electric, a desalinization unit from NELCO, and plant superstructure 
from Bluescope for the $323 million plant, which will be located at 
Kerawalapitiya, north of Colombo.  West Coast has signed a power 
purchase agreement and an implementation agreement with the 
Government of Sri Lanka for the development of the 25-year 
build-own-operate-transfer (BOOT) plant.  Ravindra Pitigalage, 
Director, Lakdhanavi Limited (a semi-private spin off of the 
state-owned Ceylon Electricity Board, and 55 percent shareholder in 
West Coast) told Econoffs April 17 that the Kerawalapitiya plant is 
due to begin operations in September 2008. 
 
¶3.  (SBU) As reported in ref A, the arrangement anticipates that the 
U.S. Export-Import Bank (Ex-Im) will guarantee and insure the U.S. 
suppliers of the project.  Other national export credit agencies are 
also participating with similar arrangements for their countries' 
exports.  The entire deal is financed by HSBC in Hong Kong. 
 
TIMELINE PRESSURE DUE TO PENDING ENERGY CRUNCH 
 
¶4.  (SBU) Although West Coast's agreements with the GSL call for 
plant operations to begin in September 2008, the Ceylon Electricity 
Board (CEB) has asked West Coast to try to speed the project toward 
a July 2008 opening.  The CEB seeks to avert a power crunch 
beginning in early 2008.  Sri Lanka's energy needs have outpaced its 
power sector development over the past several years, as the GSL has 
been slow to approve needed power projects despite predictions of 
power shortages.  If the Lakdhanavi plant could be operational by 
late July 2008, Pitigalage explained that the CEB could allocate 
more hydro power in early 2008, rather than maintaining reserves for 
late summer 2008.  Pitigalage said that West Coast was trying to 
meet the earlier target date, but that doing so would require that 
every step of the construction and financing process occur without 
delay. 
 
¶5.  (SBU) COMMENT:  The West Coast project will result in 
significant U.S. exports to Sri Lanka to meet its growing energy 
needs.  Embassy advocacy has already helped keep this project on 
track.  In light of Sri Lanka's need for power generation, the 
Embassy offers to cooperate with the ExIm Bank in any way to 
facilitate the Bank's smooth and expeditious entry into this 
project. 
 
BLAKE