State-run NTPC?s plan to set up imported coal-based 500 mw power project in the troubled Sri Lanka is getting further delayed. The reason is lack of agreement between NTPC and the Ceylon Electricity Board (CEB) to arrive at an unanimous view on the payment security mechanism, guarantees and arbitration in case of disputes arise between the two. As reported by FE recently, the government of India and NTPC had taken a wait and watch approach following attacks from LTTE in several parts of Sri Lanka and later by the Sri Lankan Army on LTTE strongholds.
However, both the sides had not given a total go bye but sorted out various issues largely related to the project structure.
The power ministry sources told FE, ?However, NTPC and CEB are yet to resolve issues regarding payment security mechanism, guarantees and the application of arbitration law in the event of any dispute. Both the parties are working hard to arrive an acceptable formula. The intervention by the governments of India and Sri Lanka will be able to sort out these issues.?
Sources admitted that NTPC and CEB have yet to float a joint venture company for the implementation of 500 mw project at Trincomalee due to the non resolution of above given issues.
As far as the extent of payment guarantees is concerned, CEB, through the Government of Sri Lanka, has offered to secure CEB?s payment obligations as per the Power Purchase Agreement, However, NTPC wants even the capital repatriation and dividend payment backed by an bank guarantee. The two sides have not also been able to agree on the process of invoking the same guarantee, if required.
Further, NTPC has made a strong pitch for Singapore to be the center of arbitration using English Law as the governing principle. However, CEB has argued in favour of Sri Lankan Law to be used to resolve disputes with Colombo as the arbitration centre.