"The government of Sri Lanka has agreed to put up 30 percent of the cost as equity, with the balance 70 percent to be raised through debt," a top official with LTL, told LBO on Thursday, on condition of anonymity.
The government has agreed to guarantee the project, with debt likely to be raised through export-credit financing, for better interest rates and longer tenure, the official said.
"The government will incorporate a project company that will be responsible for arranging a debt package. We are eligible to get support from Export Credit Agencies (ECA). It is likely to be ECA kind of financing."
Export Credit Agencies are financial institutions that provide funding through project guarantees and loans on favourable terms relative to those offered by commercial banks, to overseas markets.
ECA’s have been a leading source of funding for infrastructure projects, oil and gas development and power generation in developing countries.
Talks with export-credit agencies would begin in about a month, with Lanka Transformers already beginning preliminary work such as designs, negotiating with suppliers and getting environmental clearances.
The company has got the go-ahead, but a formal agreement with the government as well as power-purchase agreements with Ceylon Electricity Board that will buy back the electricity, are to be signed in the next few months.
"We are hoping to commission 200 megawatts by end of 2007 and the balance 100 megawatts the year after that," the company official said.
Initially run on fuel oil, the project plant is to be low cost over the conventional combined cycle plants run on auto-diesel, with estimated savings of ten million dollars a year, though with longer maintenance schedules.
The plant is to be switched to Liquefied Natural Gas (LNG) in the long term, with the government lining up Japanese funding to build an LNG unloading and storage terminal as well as another 300 megwatt plant, also at Kerawalapitiya.
The second Japanese funded plant is due to come up by 2009, the government says.
Lanka Transformers is a 54 million dollar (5.4 billion rupees) turnover company, involved in manufacturing distribution transformers, power generation as well as other engineering services.
LTL is a joint venture between the Sri Lankan government holding 70 percent and ABB AS (Asea Brown Boveri) of Switzerland, holding 30 percent.
Lanka Transformers owns an 82 percent stake in Lakdhanavi, with the balance held by LTLs employees.Lakdhanavi operates thermal and small hydro plants supplying the national electricity grid.