Tariff hike not enough to cover CEB’s operating costs: Fitch

15 November 2022 06:36 am - 15 - {{hitsCtrl.values.hits}}

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But says higher tariffs should help to reduce losses

Despite the sharp electricity tariff revision in August, it would not be enough to cover the Ceylon Electricity Board’s (CEB) operating costs, according to Fitch Ratings. The government increased the average electricity tariff by 75 percent in August 2022, amid higher feedstock costs, resulting in large losses for the CEB.

“We do not believe the new tariff will be sufficient to cover the CEB’s operating costs at current feedstock prices but it should help to reduce losses,” Fitch Ratings said. “However, if feedstock costs fall from the current highs and the CEB is able to shift its generation mix towards renewable energy, which is less costly than thermal power, it could help the CEB to breakeven and improve its financial flexibility,” it added.

The CEB generates almost 50 percent of its electricity from thermal sources and imports all its feedstock requirements. It has had increasing difficulty paying for feedstock in the past 12 months, amid the country’s severe foreign currency shortage. The suppliers have refused to sell feedstock on credit terms, in light of Sri Lanka’s poor financial profile.

The government has helped the CEB by prioritising fuel imports and providing foreign currency to pay for purchases but procuring feedstock will continue to remain challenging, with the country’s weak external finances.

Meanwhile, Fitch Ratings said the CEB owed Rs.105 billion to independent power providers (IPPs) and renewable energy generators as of end-August 2022, a 120 percent increase since end-2021. Due to non-payment, some IPPs have stopped supplying to the grid, while the smaller players are facing significant liquidity issues.

The CEB plans to settle the dues in the next 12 months, with the support of the tariff hike and by negotiating new funding lines. Fitch estimates around Rs.175 billion of additional cash receipts annually from the tariff hike but points out that timely collection could be challenging in the weak economic environment. Fitch Ratings has affirmed the CEB’s National Long-Term Rating at ‘AA-(lka)’, with a Stable Outlook. The CEB is the country’s monopoly electricity transmitter and distributor and accounts for around 75 percent of power generation.

Comments - 15

Sambo Tuesday, 15 November 2022 07:45 AM

Fitch! If you find it insufficient you provide the balance as the public cannot afford no more. They should look into why they are at loss and not increase the price crying loss.

sam Tuesday, 15 November 2022 07:59 AM

Why CEB continue with thermal power?

Sunil Tuesday, 15 November 2022 08:02 AM

Operating costs are so high because of gross mismanagement.

No More tax man Tuesday, 15 November 2022 08:16 AM

We are already paying for corruption and wastage of CEB. We cannot pay more. Privatize this monster suck our blood

Adwani Tuesday, 15 November 2022 08:36 AM

CEB is full of Corrupt Eager to steal Beggars.

Daya Tuesday, 15 November 2022 08:38 AM

Reduce the staff and make it work rather than looking at price increases all the time to fund an inefficient structure.

Jude Tuesday, 15 November 2022 09:10 AM

CEB officials Must collect outstanding money owe from businesses that owe CEB in billions of rupees!!

Jude Tuesday, 15 November 2022 09:11 AM

CEB owed billions from businesses but CEB officials take bribes not to collect outstanding debt!!

Chris Tuesday, 15 November 2022 09:38 AM

Reduce staff. Most sit around doing nothing. Stop paying dollar salaries to staff. Easily one of the most corrupt organisations.

Sam Tuesday, 15 November 2022 09:55 AM

Until the corrupt politicians and public servants are totally eradicated, this problem will never end. This is the case with everything in SL. SL is a total joke and ruled by a bunch of jokers. Don't know why IMF or World bank ever want to support this rogue country.

Sanjeewa J, Canada Tuesday, 15 November 2022 10:03 AM

Over-staffed and corruption within CEB is the reason. Tariff hike will only lead to recruit more new employees to already over-staffed team, and more corruption because they have more money. It's a management issue, it should be privatized to solve this problem, not tariff hike.

Lion Tuesday, 15 November 2022 11:56 AM

System change with a regime which is not corrupt could definitely change this existing position.

Dilakshan Seneviratne Tuesday, 15 November 2022 02:24 PM

Without dilly dallying, the CEB must be restructured and the workforce numbers must compare favourably with International best practice. This is a must and it’s incumbent upon the government to do this to reduce the burden on the taxpayer. A profitable restructured CEB will the be able to break even and even pay a dividend to its shareholder, the government of SL.

Food first religious place last Wednesday, 16 November 2022 02:53 AM

If PUCSL hadn't given the subsidy for the religious places the CEB losses would be less. Had those analysts in Fitch Ratings been aware about the PUCSL man going to religious place to announce about it, that they would've been disgusted. Sign of financial crime doing to the core.

Sambo Wednesday, 16 November 2022 07:11 AM

Why does not Fitch pay the balance without making comments.

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Tariff hike not enough to cover CEB’s operating costs: Fitch

Comments - 15

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