News
Coalgate: Substandard coal delivers more shocks than power
View(s):- Lakvijaya performance report confirms majority of shipments from South Africa do not meet plant criteria
- Questions raised over load-port tests and omissions; independent third-party tests required by contract not yet done
- CEB’s report to sectoral oversight committee raises serious concerns; loss amounts to billions of rupees
By Namini Wijedasa
Operational information released by the Lakvijaya coal power plant (LVP) continues to reveal that a majority of South African coal shipments that have arrived—after being purchased under the latest tender via India’s Trident Chemphar Ltd—do not meet the minimum criteria for use in the plant.
But the data still contradicts reports from Cotecna (an independent laboratory that is collecting samples at the unloading port in Norochcholai), which show that all of the required parameters, including ash content and gross calorific value, have been met.
Without verification from an independent accredited laboratory that the coal is substandard, Lanka Coal Company (Pvt) Ltd (LCC) cannot charge penalties from the seller. However, there is provision for a “third umpire” to be appointed, something that neither LCC nor the Energy Ministry has done.
Why no testing by a third
Richard Bay Coal Terminal in South Africa: The load port
accredited lab?
According to the purchase agreement, the seller is entitled to appoint an accredited and internationally recognised independent surveyor to test samples at the load port, subject to verification of its accreditation by the Sri Lankan mission in that country.
In this instance, the seller is Trident Chemphar, and the load port is Richards Bay Coal Terminal (RBCT) in South Africa. Two out of three laboratories nominated by Trident were rejected by Sri Lanka’s mission, leaving Mitra SK South Africa (Pty) Ltd.
But despite the Mitra SK being Johannesburg-based, the load port samples from each of the Sri Lanka shipments were—and are—sent all the way to their laboratory in Indonesia for testing. This, industry insiders say, should have raised immediate concern.
“Why does the supplier provide an Indonesia load port report when loading is done at Richards Bay Coal Terminal?” an official source queried. “It should be done 100% at Richards Bay Coal Terminal, as there are SGS, Bureau Veritas, Intertek, etc., which are big global labs.”
File photo: Substandard coals reduce Lakvijaya plant performance
Separately, the laboratory at the unloading (or discharge) port, which is the Norochcholai jetty, is selected by the buyer, LCC. That company is Cotecna. There is no provision for a separate independent party, outside of Cotecna, to test discharge port samples.
The contract states, however, that coal samples taken at the port of loading (in this case, RBCT) shall be divided into two parts, with one used for analysis by the independent surveyor and the other “retained in a suitable airtight container, properly labelled and sealed” for not less than 90 days from the date of the bill of lading of each vessel. The agreement calls this the “2nd Part”.
The buyer (LCC) may appoint another independent surveyor, acceptable to the seller, “who shall be permitted to supervise the sampling” at the load port. Two authorised representatives of the buyer shall be permitted to supervise the sampling and analysis process at the load port on a random basis, approximately one visit in every five shipments, to be facilitated by the seller.
“Furthermore, the testing of a second sample (2nd Part) shall be carried out, when necessary, by an accredited independent surveyor appointed by the buyer [our emphasis] at the Port of Loading on a random basis, and the seller shall facilitate this process.”
There is no evidence that LCC or the Energy Ministry has operationalised this clause. And once the 90 days lapse, the second sample is no longer viable.
“We are paying money to the supplier; the plant says bad coal is coming; bad coal is being burnt; all kinds of things are being said; statements are being made, but nobody knows anything,” a source familiar with the procurement process said. “The very simple solution is to appoint the third referee. We should be rushing to do this. Why are we not?”
Eighty percent of the payment—which is the bulk of it—is released based on the load port certificate. “With surrounding allegations of off-specification coal, it is imperative for the third referee to be appointed,” he urged.
Alarming new information
A report submitted by the Ceylon Electricity Board (CEB) to Parliament’s Sectoral Oversight Committee (SOC) on Infrastructure and Strategic Development revealed more concerning information regarding the coal. The Sunday Times obtained a copy of the document.
LVP data earlier showed that the Gross Calorific Values (GCV)—which represent the heat released upon combustion—of coal that arrived in shipments one, two and three were below the minimum levels required to generate optimum electricity from the plant’s three units.
The CEB report indicates that shipments four, five and six also failed on the same count. Ash content too is above acceptable levels in all. Failure on these parameters makes the consignments liable to rejection and the supplier to penalties, provided the results are from an accredited lab, which the LVP does not have.
However, LVP does record real-time data on coal feed rates, power generation and other operational aspects. In its latest report to the Sectoral Oversight Oommittee, the CEB has used this real-time data to “reverse calculate” the GCVs.
Reverse calculation of the GCV of coal in power plants is a method used to estimate the energy content of the fuel based on actual operational data, such as steam output, fuel consumption and boiler efficiency. It is primarily done to verify supplier quality or calculate daily performance, rather than relying on laboratory analysis.
Based on these calculations, the CEB report indicates that out of six shipments of South African coal received, none meet the minimum criterion of 5900 kCal/kg for GCV. Using the same calculations, however, coal from the previous supplier (Russia-sourced) shows a gross calorific value over 6200 kCal/kg.
The LCC requires GCVs of between 5,900 (reject value) and 6,150. The highest that has been achieved (based on the reverse calculation) is 5,757 kCal/kg from coal in shipment four, when burnt in LVP Unit 3. The lowest is 5,102 kCal/kg (from shipment three, burnt in LVP Unit 1).
Electricity sector sources pointed out that operational data is recorded in the power plant computer system, and that calculations based on such methodology will give the most accurate indication of actual calorific value.
Who will pay?
The CEB submitted another report to the SOC on Thursday, a copy of which the Sunday Times obtained. This published a table of “Estimated Direct Losses due to power generation (Million Rupees)”—and it amounts to Rs. 7.9bn in losses to the CEB from just the first eight shipments. The penalty to be claimed from the supplier is not considered in the calculation, it states.
“The worst-case scenario is considered, and the cost estimate was done by considering that the energy shortage is due to the quality of this coal shipment to be dispatched from the KCCP [Kelanitissa Combined Cycle Plant] power plant at the rate of 57.53 Rs/kWh,” it says under “remarks”. In other words, this is the cost incurred in filling the generation gap arising from burning substandard coal at LVP by purchasing electricity from KCCP.
According to the list, the loss from shipment one—which was failed both by LVP and Cotecna—is Rs. 595mn. But for shipment two, the remaining six shipments show much larger losses, with the next lowest being Rs. 865mn and four shipments showing losses higher than Rs. 1bn.
This becomes even more important because the CEB also shows the dates on which the six coal shipments were used for short periods and in which unit. Most shipments were unable to continuously provide the maximum generation of 300 MW per unit on a consistent basis.
The SOC has requested the Energy Ministry Secretary Udayanga Hemapala to do independent testing. Such a report has not yet been submitted. On a separate request by the SOC, staff of the Public Utilities Commission of Sri Lanka visited LVP on Thursday. Their report is pending.
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