Thursday, September 17, 2009

India to build a coal power plant in the eastern port city of Trincomalee

Sri Lanka is to sign a commercial agreement with India's National Thermal Power Corporation (NTPC.BO) to build a $500 million coal power plant in the former war zone, its Power and Energy Ministry said on Wednesday.

The coal power plant, the largest with a capacity of 1,000 MW, will be located in the eastern port city of Trincomalee, a former rebel stronghold until the military captured it in mid 2007 in the final phase of a 25-year war that ended on May 18.

"We are going to sign the commercial and power-purchasing agreements next week with India's National Thermal Power Corporation," John Seneviratne, Minister of Power and Energy told Reuters.

The project will be carried out in two phases and the first is expected to be completed by 2012, the ministry said in a statement. "Initially both parties will invest $75 million each and later $350 million will be invested by both parties."

Seneviratne did not comment on the terms and conditions of the funding arrangement.

China has also offered an $891 million loan for a 900 MW coal power plant on a 20-year, 2 percent interest rate bearing loan to build the second and third phases of the 900 megawatt coal-fired Norochcholai power plant.

The $40 billion economy with 20 million people depends mainly on hydro and thermal power with around 25 power plants.

The island nation's private sector has repeatedly complained about high price and shortage of energy, for which the government has blamed seasonal droughts and expensive global oil prices.

Much of Sri Lanka's infrastructure, from roads to hospitals, has been neglected by successive governments focused on the two-decade civil war that has killed more than 80,000 people.

© Reuters

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