Colombo (News1st) :  A study done by Verite Research has exposed that the Government of Sri Lanka had taken a massive risk and made investments using public funds in the electricity sector, with no benefit. This transaction dates back to 2006. A firm by the name West Coast (Pvt) Ltd had been formed for the construction of the 300 MW Kerawalapitiya Combined Cycle Power Plant. Initially, it had been decided that the main shareholder of this company should be Lakdhanavi Ltd.

A majority share of Lakdhanavi Ltd is owned by Lanka Transformers Limited (LTL is a company in which the Ceylon Electricity Board holds a majority share). However, it is the government that had given a guarantee to secure a 22.7 Billion Rupee loan facility from HSBC for this project.

The government had also intervened to secure more funding for the project – 2.9 Billion Rupees from the National Savings Bank and another 2.9 Billion Rupees from the Employees Provident Fund.

According to the Foreign Loans Act of Sri Lanka, if a guarantee is given by the Government of Sri Lanka relating to a foreign loan for a project, the state should have 50 percent stake in the project. The study has revealed, that the 50 percent share of West Coast (Pvt) Ltd had been temporarily vested with the government on 14 separate occasions to fulfill the aforementioned criteria.

As of March 2011, the Government owned the 50 percent shares of West Coast (Pvt) Ltd, while 18.2 percent was owned by Lanka Electricity Company Private Limited which is owned by the CEB, another 27.1 percent was owned by the EPF and the other 4.8 percent was owned by Lakdhanavi Ltd.

A startling factor in this expose, is that for the guarantee, no dividends were paid to the Government of Sri Lanka.However, dividends had been paid to Lakdhanavi Ltd, LECO, and the EPF.

The method of payment is an astounding factor in this misappropriation of funds;

Accordingly, Lakdhanavi Ltd which owns only 4.8 percent of shares had been paid a dividend of 39.75 percent. The EPF which owns 27.1 percent of shares was paid a dividend of 20.04 percent. LECO which owned 18.2 percent of shares was paid a dividend of 20.4 percent.

Adding to this, an agreement had been reached for the 50 percent shares owned by the Government to be vested with Lakdhanavi Ltd once the entire loan amount is paid off.

The research study also revealed that the Ceylon Electricity Board does not own 48.5 percent of shares in West Coast (Pvt.) Ltd.

Left Centre Convenor Chameera Perera states with regards to the energy sector revelations, this scam is far greater than the Central Bank Treasury Bond Scam and that a Presidential Commission should conduct independent inquiries regarding these massive scams.