Performance Evaluation Report: AES Kelanitissa Power Project in Sri Lanka | Asian Development Bank

Performance Evaluation Report: AES Kelanitissa Power Project in Sri Lanka

Evaluation Document | 27 December 2012

Presents the independent evaluation of the AES Kelanitissa Power Project. Identifies lessons from the project that can be used to assist in the design and implementation of future ADB private sector operations in the region.

The AES Kelanitissa Power Project aimed to ease a critical shortfall in Sri Lanka's power supply and to minimize the cost of load-shedding by helping to balance the country's supply dependence on hydropower. Other project goals included expanding consumer access to reliable and affordable power to at least 80% of the population by 2005, and improving governance in the power sector through private participation.

The project, supported by the Asian Development Bank (ADB), constructed and operated a 163-megawatt auto diesel-fired combined cycle gas turbine power plant at the site of an existing plant on the lower reaches of the Kelani River.

The project was financed by a $26 million ADB direct loan, approved in 2000, and a $52 million partial risk guarantee. AES Kelanitissa Limited, the project borrower, is a joint venture between AES Corporation, an independent power producer based in the United States, and Hayleys Limited, a Sri Lankan conglomerate established under a build-own-operate-transfer arrangement with the Government of Sri Lanka. Under that arrangement, the plant would be transferred to the government at the end of a 20-year concession period.

The project overall is rated less than successful, although its performance evaluation report noted a number of positive outcomes, including its role as a major catalyst in stabilizing Sri Lanka's supply shortage within a short period - a remarkable achievement. The overall rating was based on evaluative findings for the criteria of private sector development; business success; economic development; and environmental, social, health, and safety performance.

The evaluation report says ADB should consider alternative fuels - such as renewable energy, thermal fuels, and clean coal - when appraising the cost and benefits of oil-fired generation plants.