A Review of Challenges to Attract Public Private Partnership (PPP) Investments to Power Generation Infrastructure In Sri Lanka (SL)

Abstract

Ceylon Electricity Board (CEB) is a State Owned Enterprise (SOE) operating in power industry of Sri Lanka being a monopolistic. Long Term Generation Expansion Plan (LTGEP) that prepared by CEB and approved by Public Utility Commission and the Cabinet of Ministers. As per LTGEP capital investments for Generation Infrastructure from 2018 to 2037 had been projected around USD 14,568 million. As per Electricity Act 2009, CEB was vested with responsibility to implement LTGEP to satisfy power requirement of the country. The Government policy decision of sourcing of funds by CEB its own has been implemented from year 2015 and CEB is operating for last several years with negative cash flow mainly due to subsidized tariff structure. The funding agencies have imposed stringent financial covenants into loan agreements. CEB has been challenged to adhere with those financial covenants due to existing mal financial position of CEB. Electricity Act 2009 states any person to generate capacity above and over of 25 MW, shall Government hold 51% of ownership. Sri Lanka by law any investment in power generation above and over 25 MW shall be a Public Private Partnership (PPP). Non implementation of above projects on time will lead to power shortage in the country and accelerates cost of unit of electricity immensely to pay by the public. In this circumstance PPP model has proven that mostly applicable for development of public infrastructure in developed and developing countries. CEB being a monopolistic player in the power industry, is required to pursue PPP for development of power generation infrastructure to assist growth momentum of the country. The challenges pertaining to institution could be addressed within the organization such as effective leadership for trust building and coordination, modification of bureaucratic structure of organization with changing environment to attract private investment. The main challenges have been identified such as state credibility and inconsistent policies .The challenge of social support could be harnessed by CEB with Ceylon Electricity Board Engineers Union (CEBEU) which has become integral arm in collaboration for policy formulation in power sector of Sri Lanka. With the reviewed literature could conclude that state credibility, inconsistent policies and lack of public support had hindered the private investor confidence in power sector in SL.