Fitch Ratings says it does not believe cash flow from operations will be sufficient to cover the Ceylon Electricity Board’s (CEB) interest obligations in 2023, despite a 150% tariff increase.
Issuing a statement, the Ratings Agency pointed out that this was due to the reduced contribution from low-cost hydropower generation during the year, which compelled CEB to purchase emergency power at higher costs to meet the shortfall.
“At the same time, energy demand has risen with the gradual recovery of economic activity. CEB has requested an off-cycle tariff hike to cover its increased costs, but it is yet to be approved,” Fitch said.
Fitch Ratings has also upgraded the CEB’s National Long-Term Rating and the rating on CEB’s senior unsecured debentures to ‘BB+(lka)’, from ‘B(lka)’, adding that the Outlook is Stable.
The upgrade follows the 28 September 2023 upgrade of the Sri Lankan sovereign’s Long-Term Local-Currency Issuer Default Rating (IDR) to ‘CCC-‘, from ‘Restricted Default (RD)’.
The Ratings Agency stated that the CEB’s ratings are equalised with that of its parent, the Sri Lankan sovereign, based on its 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.
Full Fitch Ratings report :