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CEB seeks tariff hike; cites Rs. 9.5b interim loss and other costs
View(s):By Kapila Bandara
Sri Lanka’s loss-making state power utility, the Ceylon Electricity Board, is seeking an overall 6.8% tariff increase from October to December, citing a laundry list of multi-billion rupee cost increases, including energy and financing costs in the billions and Mahinda Rajapaksa-era debt for the Uma Oya project.
In a detailed submission to the regulator, the Ceylon Electricity Board has asked for a third tariff revision for more than 7.2 million users. The CEB has planned an overhaul of operations, and unions are agitating.
The CEB estimates a deficit of Rs 7.694 billion for the last three months of the year on revenue of Rs 112.372 billion. Total cost is estimated at Rs 125.3 billion, including generation and capacity cost, cost of transmission and distribution, as well as finance costs. Forecast energy cost alone exceeds Rs 68 billion.
The CEB ties the energy cost increase to a forecast increase in power demand.
For the first half, the CEB has reported a loss of Rs 9.525 billion for the group, unaudited financial filings to the Colombo Stock Exchange show. Revenue has dropped by more than 38% from the year-before period to Rs 201.509 billion. Finance cost has fallen by more than half to Rs 7.783 billion, at prevailing lending rates that are much lower now.
The CEB also reports Rs 457.2 million in retirement benefit obligations. Consumer deposits amount to Rs 298.6 million.
One big cost item cited by the CEB to the Public Utilities Commission of Sri Lanka for the quarter, predictably, is financing costs of Rs 7.83 billion, considering the long-standing debt the utility carries. This includes financing costs of legacy debt that has not been restructured. The CEB cites Rs 4.3 billion in capital repayment of term loans and Rs 1.7 billion in interest as part of the financing cost breakdown. Capital repayment of term loans has risen by more than Rs 2b.
Compared with the June forecast, financing costs have risen by Rs 2.48 billion, the CEB says.
Debenture interest is Rs 471 million.
The biggest portion of the debenture proceeds, or Rs 14 billion, making up 70%, was used to pay independent power producers. Rs 6 billion went to pay the Ceylon Petroleum Corporation. The Rs 20 billion debenture was issued in April 2021 at an annual coupon rate of 9.35% compared with a 7.05% interest on a government security.
The CEB’s own forecasts in June are off the mark by the billions in relation to costs such as power generation (energy and capacity costs), finance costs, and distribution revenue. The CEB does not explain the cost divergence, except to say “a significant increase in all major cost items’’.
For energy costs alone, the CEB proposes an increase of Rs 3.97 billion, projecting the total energy costs for the power plants to be Rs 68.46 billion from October to December, suggesting an increase in forecast demand.
The biggest energy cost is for the hydro plants Mahaweli, Laxapana, and Samanala, higher than for coal.
The forecast capacity cost increase is Rs 1.32 billion, taking the full cost to Rs 20.23 billion. This is attributed to project delay-related payments of USD 5 million (about Rs 1.5 billion) for the Uma Oya power plant, largely funded from an Iranian loan taken by the Mahinda Rajapaksa regime. The debt will be paid through the Ministry of Agriculture, Livestock, Lands, and Irrigation according to a Cabinet decision.
More than US$19.3 million (Rs 5.8 billion) is overdue for the Iranian contractor Farab, of which US$1.6 million has been paid in June, the CEB says.
The CEB has not yet signed fuel supply agreements for power generation plants regardless of directives. Transmission revenue errors in the previous tariff revision submission have not been resolved either.
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