Changing hands in demanding times | Sunday Observer

Changing hands in demanding times

Image of one of the largest floating solar power plants in Japan; there is a strange silence regarding a project that was proposed to develop a 100MW, floating solar farm on the Maduru Oya Reservoir.
Image of one of the largest floating solar power plants in Japan; there is a strange silence regarding a project that was proposed to develop a 100MW, floating solar farm on the Maduru Oya Reservoir.

Sri Lankans call changing times as these “Sankranthi”. Last week saw changes in the top defense hierarchy with Army Commander General A.W.J. Crishantha De Silva being promoted to Chief of Defence Staff. His old post is still vacant though General Mahesh Senenayake, currently acting Army Commander, is tipped to be promoted this week as the Commander. The Defence Secretary, Eng. Karunasena Hettiarachchi is due take up position as Sri Lanka´s Ambassador to Germany. His successor is also yet to be named though speculation is that former Additional Solicitor General Kapila Waidyaratne will be appointed to that post. Other contenders to the Defence Secretary post also include the current chair of People´s Bank, Hemasiri Fernando.

However, what came as a surprise to some was the resignation of Secretary to the President P.B.Abeykoon on Friday, June 30 and the appointment of Austin Fernando to the post on Saturday, July 1.

Austin Fernando´s appointment did not come as a surprise for insiders familiar with the inner workings of the Presidential Secretariat. For months now, murmurs of a change were whispered within its wall. On one hand, Abeykoon was unwell, a persistent back pain was troubling, on the other, his relationship with the President was not in a state of perfect equilibrium. For sometime now, the triumvirate of Austin Fernando, Kingsley Fernando and Rohana Keerthi Dissanayake, the latter two being senior additional secretaries to the President, have been backstopping Abeykoon.

Insiders

For example, the two Fernando´s and Dissanayake are believed to be the three insiders who the President consults over each cabinet paper. While the final decision is with the President, their dissent or accent plays an integral role in the decisions taken by the President. Interestingly, all three of them have been associated with the President for some time, with the two Fernandos having a link through Polonnaruwa where both were additional government agents while Dissanayake has worked under the President in his previous ministries.

A close aide to the President was to comment that unlike former President Mahinda Rajapaksa, who walked into the post along with Lalith Weeratunga, who he inherited as Secretary to the Prime Minister, but had a working relationship as well as a personal relationship going back decades, President Sirisena did not have the luxury of being able to bring his own secretary when he took over office. The initial appointments at secretarial level were decided by a committee of retired officials who met at the Leader of the Opposition´s office hours before President Sirisena took oaths.

Such was the bond between the Good Governance leadership that President Sirisena left most of the mundane business such as appointments as ministerial secretaries in the hands of the team already assembled by the then Leader of the Opposition, Prime Minister Ranil Wickremesinghe.

Austin Fernando is a trusted confidante of the President also going back decades – with their first encounter being in Polonnaruwa where the additional government agent, Fernando, refused to accept a letter of resignation from a Gramasevaka, the President, who Fernando thought had a bright future in government service and should not get his hands dirty in politics.

Fernando as a Sri Lanka Administrative Service (SLAS) officer, (from one of the first batches to join the Ceylon Administrative Service (CAS) in 1963, created that year to replace the Civil Service), had a distinguished career in the administration till 2005, when after a stint as the Secretary to the Ministry of Defence, he ended as the senior advisor to Prime Minister Ranil Wickremesinghe during Wickremesinghe´s previous tenure in government. His contemporaries include the current senior advisor to the Prime Minister Ramalingam Paskaralingam.

Fernando, reports indicate, had resigned his position as Governor of the Eastern Province on the 22nd of June. This indicates that the resignation of Abeykoon was not sudden as suggested but had been planned with a successor located and agreed to before he left office. While there are murmurs of dissent from SLAS seniors who are questioning as to why a suitable SLAS officer could not be found to fill the vacancy, many in the government and out of the government were quick to welcome Fernando and wish him well with several saying that this appointment is two and half year late.

On the 18th of June, we afforded space in this newspaper for a right of reply from the Ministry of Disaster Management over a report we had published two weeks prior to that on the 4th of June 2017 regarding Ministry using only eight per cent of the capital allocated to it through the 2016 Budget. In their right of reply, and related communications, the Ministry was to aver that the figures included in their right of reply were the “real” figures. In our rejoinder to that reply, we pointed out that our figures came directly from a report submitted to the parliament by the Ministry, a point that the Ministry did not contest, and if their new figures are the real figures, then, corollary, the figures they provided to parliament must be “unreal” or not truthful. We also pointed out other issues with their rejoinder, including monies spent as foreign aid, that appears not to have been counted in their report to the parliament. We have not heard from the Ministry since the reply and rejoinder was published two weeks ago.

Isolation

It now appears that Ministry of Disaster Management is not a case in isolation when it comes to providing wrong figures, intentionally or unintentionally, to the Parliament, the supreme legislative body of this country, which, also is, ultimately responsible for the nation´s fiscal affairs.

Discrepancies have been noted in a number of performance reports submitted to the parliament by Ministries, departments and corporations while some Ministries and Corporations are yet to submit any reports to the parliament – some of them since the requirement to submit these reports was introduced in 2005. A summary of these discrepancies is now being prepared by a parliamentary watchdog committee and is slated to be presented to the house by end of July.

In another development, the Public Utilities Commission was to ask the Ceylon Electricity Board to amend the Board´s long-term generation plan last week. As we report elsewhere in this newspaper today, the CEB´s response, through the Secretary to the Ministry of Power and Renewable Energy, will be to submit a cabinet paper this week seeking a clarification of the government´s stated policy, which, according to the acts governing the CEB, should be a “least cost” policy. The issue is contentious – the President is on record saying the country must move towards renewable energy - aiming at 60 percent of the energy mix to be renewables by 2020 and 70 percent by 2030. Yet, as Ashoka Abeygunawardana, chair of the Strategic Enterprise Management Agency (SEMA), and close confidante of the President pointed out at the PUCSL public consultation held last week on the CEB plan, “CEB only speaks of 35 percent renewable by 2030 and 31 percent by 2037.”

In our report today, Secretary Batagoda contends that the least cost option is a mix of coal and LNG, a contention that is debatable and is being contested by other experts in the field.

Every year for the last ten years, Lazard, a financial advisory and asset management firm operating in 42 cities across 27 countries, produces the Lazard´s Levelized Cost of Energy Analysis, accepted by energy experts as one the preeminent reports on energy costs. While based on United States figures, the report provides a good indication for global prices and costs. The full report is available here: https://www.lazard.com/media/438038/levelized-cost-of-energy-v100.pdf and can be downloaded for a full explanation of Lazard´s methodology of computing the costs and their assumptions.

While acknowledging the US centric nature of the report, if one considers the cost per Megawatt hour across both renewables and conventional sources of energy, unsubsidized by any government subsidy scheme, the clear winner at the least expensive end is Wind, at US$32 per Mw/h and solar – thin film – at utility scale, at $46. The next, surprisingly is Gas combined cycle at US$48. These are the least expensive alternatives. The least expensive coal on the other hand is US$60 while a LNG reciprocal engine, a more modern version of the Gas combined cycle that burns the gas more efficiently, cutting down more emissions, cost US$68 per unit.

As it was pointed out at the PUCSL public consultation, another factor that CEB appears not to be counting is the vagrancies of the foreign exchange market and fuel, whether it is gas, coal or diesel, prices. In both wind and solar, the price is fixed now with no foreign exchange risk, unless the country is borrowing in dollars to pay for the plant, which can be easily hedged. Changing market prices for fuel is not so easy to hedge as we have learnt through bitter experience during the previous regime.

According to the Lazard report, a price variance of coal can result in a variance between $57 to $148, while the variance is limited to less than US$10 for thin film utility scale solar.

Emissions

The report also indicates a two Million metric tons a year less carbon emissions from a Gas combined Cycle plant producing 4,888 Gig watts a year, when compared with a similar coal plant. The total cost of Gas is computed as US$62 million a year less than Coal. A Solar utility scale will be US$58 million cheaper.

While we are yet to find the perfect answer, for example, solar power is yet to be stored cheaply – though major advancements are being made globally in power storage – experts argue that by producing solar power during day time and conserving coal and hydro for the night, augmented by wind, the country may be able to avert a looming power crisis that CEB itself is predicting for 2018.

It is in this light that experts are questioning as to there is a strange silence regarding a project that was jointly proposed by President Sirisena (as Minister for Mahaweli Development) and Minister Ranjith Siyambalapitiya, the Minister for Power and Renewable Energy, to develop a 100MW, floating solar farm on the Maduru Oya Reservoir. While the cabinet proposal received the go ahead more than two months ago, no bids have been called and CEB says they are not involved. The cost of this project will be cheaper than land based projects as the cost of land is expensive in land-locked country like Sri Lanka while the project also will reduce water evaporation, saving about 3 to 5 per cent water every season from the reservoir.

While the CEB continues gerrymandering, branches of foreign banks operating in Sri Lanka, appears to be taking a strange stance regarding inward remittances from investors.

Infrastructure

According to a Singaporean Company, who are seeking to invest US$10 million in a major infrastructure project in Sri Lanka, branches of three foreign banks last week showed a reluctance to open a Securities Investment Account, or a SIA account, which is necessary local banks, on the other hand, welcome opening of these accounts. However, corporate investors prefer to work through international banks such as HSBC, StanChart, and Citibank.

According to a source from the Singaporean company, foreign bank branches had asked the company to open a local branch first before opening an SIA account.

Deputy Finance Minister Eran Wickramaratne was to comment last afternoon that while the government should not get involved in stipulating what services foreign banks must offer in Sri Lanka, the Ministry would need to inquire from the banks what issues are there in opening these essential accounts.

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