Identifier
Created
Classification
Origin
05COLOMBO1026
2005-06-08 09:56:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Colombo
Cable title:  

2005 REPORT ON INVESTMENT DISPUTES AND

Tags:  CASC EFIN EINV KIDE PGOV OPIC 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS COLOMBO 001026 

SIPDIS

DEPT FOR EB/IFD/OIA/JPROSELI AND L/CID/JNICOL

SENSITIVE

E.O. 12958: N/A
TAGS: CASC EFIN EINV KIDE PGOV OPIC
SUBJECT: 2005 REPORT ON INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS

REF: SECSTATE 70014

UNCLAS COLOMBO 001026

SIPDIS

DEPT FOR EB/IFD/OIA/JPROSELI AND L/CID/JNICOL

SENSITIVE

E.O. 12958: N/A
TAGS: CASC EFIN EINV KIDE PGOV OPIC
SUBJECT: 2005 REPORT ON INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS

REF: SECSTATE 70014


1. The following dispute is being submitted for 2005 as
per section 527 of the Foreign Relations Authorization Act
(FRAA) for Sri Lanka:

(A) Claimant A

(B) 2004

(C) Claimant had been contracted in June 2000 to provide
power to the national grid under a combined cycle agreement
signed with the Ceylon Electricity Board (CEB),which
retains the monopoly on power transmission and, together
with its subsidiary, Lanka Electricity Company, has the
monopoly on power distribution in the country. Under the
Power Purchase Agreement (PPA) the CEB was required to
establish two Letters of Credit (LC) with an aggregate value
of $20 million.

In March 2004, due to a fire that had shut down the
claimant's power plant, and at the request of the Government
of Sri Lanka (GSL),a standstill agreement was signed
between claimant, CEB and the Ministry of Finance (MOF) to
operate the plant in open cycle mode. In May 2004 the
agreement was rendered invalid as the CEB did not make full
payment for energy generated under the terms of the open
cycle agreement. As a result US$3million was still owed to
the claimant.

Claimant met with CEB, Secretary to the Treasury and
Secretary to the Ministry of Power & Energy to discuss the

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outstanding payment. GSL officials requested a renegotiation
and as a result, claimant offered a reduction of US$600,000
out of the total US$3 million outstanding. The Claimant
received a new agreement from the Attorney General's
Department through the CEB, which reflected the new payment
terms. The Claimant accepted this new agreement.
Nonetheless, despite Cabinet approval and CEB Board
approval, the Chairman of the CEB has refused to make the
required payment of US$2.4 million. Establishment of
Letters of Credit (LC),as per the original PPA, has also
not been implemented to date.

Post has made representations on this matter to the
Secretary to the Ministry of Finance, Minister of Power &

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Energy and the Presidential Adviser on Economic Affairs.
These officials have assured Post that the matter is being
looked into and claimant will be remunerated for the
outstanding payment. However, no payment has been made nor
LC established thus far. Claimant provided most recent
update on this issue on May 17, 2005.


2. Claiman A: AES

LUNSTEAD