The Fitch Ratings Agency saidthat the Government plans to unbundle the Ceylon Electricity Board (CEB) will result in improving its efficiency and competitiveness.
The Government plans to unbundle CEB’s generation, transmission and distribution assets across 14 companies established under the Companies Act, as part of Sri Lanka’s energy sector reforms. The bill proposing the restructuring will be presented to parliament in October 2023 approval.
“We expect the unbundling to provide CEB with autonomy and flexibility, while improving its efficiency and competitiveness. However, it is too early to ascertain how the restructuring will affect CEB’s credit profile, as the plan’s details are still vague.”
As of end-August 2023, CEB owed LKR 212 billion (June 2023: LKR208 billion) to state-owned Ceylon Petroleum Corporation (CPC), IPPs and non-conventional renewable energy (NCRE) generators.
“The government plans to take over 70% of the dues to CPC and the IPPs by end-2023 to ease the burden on CEB. Dues to NCREs stand at 10-11 months at present, and CEB plans to settle them gradually with operating cash flow.”
Fitch Ratings last week also upgraded CEB’s National Long-Term Rating and the rating on CEB’s senior unsecured debentures to ‘BB+ (lka)’, from ‘B(lka)’. The Outlook is Stable.
The upgrade follows the September 28, 2023 upgrade of the Sri Lankan sovereign’s Long- Term Local-Currency Issuer Default Rating (IDR) to ‘CCC-’, from ‘Restricted Default (RD)’. CEB’s ratings are equalised with that of its parent, the Sri Lankan sovereign, based on our assessment of a ‘Very Strong’ likelihood of state support under our Government- Related Entities (GRE) Rating Criteria.
CEB is Sri Lanka’s monopoly electricity transmitter and distributor and accounts for around 75% of the country’s power generation.
