Parliament’s Committee on Public Enterprises has recommended a full forensic audit into emergency power purchases from Ace Power Embilipitiya (Pvt) Ltd, after documents showed the former Ceylon Electricity Board paid the private producer about 10.39 million US dollars in return-on-equity charges alone between 2018 and 2024.
The figures appear in Parliamentary Publication Series No. 396, which contains the Energy Minister’s observations on COPE’s investigations, the Daily Mirror reported.
A contract that expired in 2015
The payments continued despite the original ten-year build-own-operate power purchase agreement for the 100-megawatt furnace oil plant expiring in April 2015.
After that expiry, the state utility repeatedly sought and won Cabinet approval to keep buying power from the plant. The extensions were justified on emergency grounds, citing delays in building planned least-cost generation, transmission bottlenecks in the southern grid, and droughts that drew down reservoirs such as Samanalawewa.
Between 2016 and 2023 the utility executed five separate extensions and short-term agreements. A one-year extension from April 2016 cost 4.16 million dollars in non-escalable capacity charges, of which 3.16 million dollars were equity returns. A second extension in 2017 added 4.37 million dollars, including 3.32 million in equity returns. A three-year extension covering 2018 to 2021 accounted for 13.17 million dollars, of which 10.02 million dollars were equity returns.
Further short-term purchases followed during the 2022 economic crisis and again in late 2023 to cover hydro shortfalls in the south.
Regulator’s objections overridden
The Public Utilities Commission of Sri Lanka repeatedly told the utility and the Energy Ministry that extending expired independent power producer contracts breached Section 43 of the Sri Lanka Electricity Act, which requires competitive tendering for new capacity. Ministry officials invoked emergency provisions under Cabinet directives to proceed.
An attempt to buy the plant outright collapsed. Cabinet approved negotiations in March 2016; the company offered to sell for 17 million dollars, while the Chief Government Valuer appraised the facility at Rs. 2.37 billion in July 2017. The company declined to lower its price, citing maintenance and overhaul spending, and the state resumed short-term capacity payments instead.
The unbundled utility notified Ace Power Embilipitiya on January 30, 2025 that purchases would no longer be required. COPE made its forensic audit recommendation after a hearing on September 24, 2025.