Sri Lanka's Hemas Builds another Hydropower Plant

14th June 2010, www.lankabusinessonline.com

Sri Lanka's Hemas Power is building another hydropower plant, raising generation capacity to 24 Giga Watt hours (millions of units) of energy a year from hydro plants which it plans to expand in preference to fossil-fuel power.

Managing director Kishantha Nanayakkara said the firm, a unit of the Hemas group, believes demand for electricity is expected to rise faster than forecast with the end of a war.

"We remain bullish on hydropower," Nanayakkara told shareholders in the firm's annual report for the financial year ending March 31, 2010.

In December 2009 the firm spent 196 million rupees to buy Upper Agra Oya Hydro Power, formerly known as Senok Mark Hydro, an operational 2.6 MW mini-hydropower plant located at Lindula in the central hills.

The year also was the first full year of operations at its 2.0 MW Giddawa hydropower plant, which however generated less than expected owing to poor rainfall in its catchment.

"Operations underpinned by a higher tariff prevailed and tight cost control measures enabled Giddawa to post commendable financial results during the year," Nanayakkara said.

The firm began construction work on its Magal Ganga hydropower project which is to be commissioned towards end-September 2011.

"When the operations of Magal Ganga project commences, our renewable energy portfolio will carry a potential annual generation capacity of 24 GWh," Nanayakkara said.

Hemas also has a joint-venture company called Heladhanavi which generates thermal power and contributes about seven percent of the nation’s annual electricity generation.

Nanayakkara said that in "a buoyant post-war era" the power generation sector is a "key catalyst in unlocking the nation’s economic potential."

The island's 30-year ethnic war ended in May 2009 resulting in an economic revival.

"If economic activities gather momentum as widely anticipated, the country’s per-capita income level is likely to grow at a faster pace," Nanayakkara said.

"With that, it becomes obvious that the household electricity consumption will also rise. Greater economic activity could also fuel greater electricity demand from the industrial front."

Demand for electricity is seen rising faster than that forecast by government before the war ended, Nanayakkara said.

While almost half of the increase in demand is to be met through coal-power plants, Nanayakkara said they believe coal-fired power generation of such magnitude, despite costing less, could pose different challenges like environmental pollution.

He said he expects the bulk of future renewable energy generation, be it hydropower, wind or bio-mass, to be supplied by the private sector.

Sri Lanka's target is set to meet 10 percent of the country’s energy generation by 2015 through renewable energy sources.

"Taking stock of the available opportunities in the country, we find it most prudent to align our strategic direction on the renewable energy sector," Nanayakkara said.

"Therefore, despite the existence of challenges and hurdles, your company continues to be bullish on the country’s hydropower sector.

"We are strongly committed to pursue opportunities to acquire or develop viable hydropower projects whilst keeping a vigilant but cautious eye on emerging opportunities in other renewable energy segments," Nanayakkara said.