"The power station will have two 250MW coal plants to be built in two stages," Minister Seneviratne said.

"We hope that it will be able to generate a unit at around Rs4.50 to Rs4.75 a kilowatt (US cents 4.5 to 4.75)."

This is based on current coal prices, which can also change in the future, though coal prices are less volatile than petroleum.

CEB now pays about Rs10 per unit as variable cost (without counting capacity charge) for power generated in combined cycle plants.

The 50/50 joint venture coal plant with NTPC is estimated to cost around US$500 million to build, with an equity component of US$150 million.

"The CEB will have to put in US$75 million and NTPC will have to put in US$75 million," Seneviratne told LBO.

Another 3X300MW coal plant at Norochcholai, in the west coast of the island, is expected to commence construction in early May after a Chinese firm was awarded a Design Build Transfer (DBT) contract earlier this month.

"We expect the Norochcholai plant to generate a unit at around Rs4.60 to Rs4.90," Seneviratne said.

The Norochcholai Chinese plant has been signed at US$455 million for the first 300MW, with plans to build two 300MW plants later at the same site.

The Chinese Export Import Bank is giving a 20-year loan at 2 percent for the project.

The plant is expected to be delivered in 54 months, which means it would deliver power in 2010, if construction begins in May 2005 as planned.

-Asantha Sirimanne: asantha@vanguardlk.com