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Integrity of Kerawalapitiya LNG Plant agreement becomes questionable

The integrity and sensibility of the Framework Agreement between the government and the New Fortress Energy (NFE) Company has been questioned as it has resulted in assigning to NFE economic rights that were a part of an ongoing tender process, economic analyst claimed.

The tender was to build a Floating Storage Regasification Unit (FSRU), and the pipelines that could supply natural gas to two existing power plants in Sri Lanka.

The Cabinet memorandums relate to an investment in shares of West Coast Power (Pvt.) Ltd (WCPL mentions details of the Framework Agreement, which also assigns to NFE the right to build an FSRU and the pipelines that could supply natural gas to one of the two power stations.

It was mentioned in the tender Invitation No. B/12/2021.while bids for tender Invitation No. B/12/2021 had already been closed on 18 June 2021, and for which NFE had not submitted a bid.

The Cabinet memorandum dated 6 September states “…if the announced fixed charge for the FSRU and the Pipelines from the existing tender that is being processed is taken into account”.

These references to ‘an existing tender ’, make clear the overlap between the tender notice (No. B/12/2021) and the Framework Agreement with NFE.

These references also confirm that the MoF was aware of the conflict with the ongoing tender process.

The above substantiates the MP’s claim that NFE has been awarded, through a non-competitive contract, economic rights that were part of a separate ongoing tender process (albeit a controversial one) in which NFE had not participated, analysts said.

The US based New Fortress Energy (NFE) signed a framework agreement with Sri Lanka’s finance ministry to build a floating liquefied natural gas (LNG) terminal on July 14, which opponents say will give the company a monopoly in the supply of LNG to the island.

As part of the agreement, the government will facilitate the obtaining of necessary permits and entitlements by New Fortress to construct the LNG terminal. The terminal is expected to begin operations by the second half of 2022.

The terminal will be located off the coast of Colombo to supply gas to the country’s power plants, primarily located in the Kerawalapitiya power complex.

Sri Lanka’s controversial LNG deal purportedly with the US-based New Fortress Energy Inc, is reportedly falling part after opposition factions exposed serious anomalies in the infamous midnight agreement.

An explosive revelation has been made in parliament last year noting that the agreement for the LNG Plant in Kerawalapitiya was not signed with New Fortress Energy, but with a separate company.

The government has in fact signed it with NFE Sri Lanka Power Holding LLC., and not New Fortress Energy Inc.

“On the 21st of September 2021, New Fortress Energy Inc in a press release announced that it executed a definitive agreement for New Fortress’ investment in West Coast Power Limited (“WCP”), the owner of the 310 MW Yugadanavi Power Plant based in Colombo, along with the rights to develop a new LNG Terminal off the coast of Colombo, the capital city.

As part of the transaction, New Fortress will have gas supply rights to the Kerawalapitya Power Complex, where 310 MW of power is operational today and an additional 700 MW scheduled to be built, of which 350 MW is scheduled to be operational by 2023.

However, concerns are now mounting over this agreement, which was also dubbed as the midnight deal, by the opposition parliamentarians.

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