Ace Power contracts terminated amid explosive forensic probe

By the Editorial Team · Sunday, September 6, 2026

The Sri Lankan government has fully terminated the emergency power purchase agreements with Ace Power's Embilipitiya plant amid a forensic audit investigating alleged financial irregularities and excessive spending. This decision ends costly short-term contracts that bypassed a prior directive to buy the plant outright, highlighting concerns over government expenditure and prompting increased scrutiny of energy sector practices.

The emergency power purchase agreements (PPAs) between the Sri Lankan government and Ace Power have been fully terminated amid ongoing scrutiny and a comprehensive forensic audit into alleged irregularities and excessive state spending. This move marks the end of a series of controversial short-term contract extensions for the private power producer’s Embilipitiya plant.

The unbundled state utility formally informed Ace Power Embilipitiya’s management that all purchases of power from the facility have ceased permanently. This decision follows prior Cabinet-level refusals to prolong emergency power agreements with other independent power producers, including Ace Power Matara and Asia Power Sapugaskanda.

The parliamentary oversight committee on Public Enterprises (COPE) recommended the forensic investigation to examine financial practices related to emergency energy procurements and capacity charges paid to Ace Power. The probe seeks to determine why government officials bypassed a 2016 Cabinet directive instructing the outright purchase of the Embilipitiya plant after the initial 10-year contract term concluded.

Instead of acquiring the asset, authorities repeatedly resorted to short-term contract renewals under emergency provisions. Between 2018 and 2024, these arrangements reportedly resulted in about US$10.39 million paid solely as return on equity to the private operator, according to parliamentary committee findings.

Efforts to purchase the plant stalled amid disputes over its valuation. While the Government Valuer assessed the asset at Rs. 2.37 billion, the National Audit Office (NAO) later determined a more accurate baseline value was approximately Rs. 4.17 billion. Subsequently, the government abandoned the buyout plan, opting to continue capacity payments that exceeded the plant’s outright acquisition cost.

The ongoing forensic audit is also examining several financial anomalies linked to the contract extensions. These include the state utility’s absorption of Rs. 6.27 billion in corporate tax liabilities pertaining to Ace Power and Rs. 1.94 billion paid in interest on delayed disbursements.

The investigation is expected to shed further light on the financial and administrative decisions that resulted in significant government expenditures under emergency PPAs with Ace Power, as authorities aim to increase oversight and accountability in the energy sector.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.