Losses of four key SOEs closely follow profits of state-owned financial institutions

By Chandeepa Wettasinghe
Four key state-owned enterprises (SoEs) made Rs.30.53 billion in operational losses, almost as much as the operational profits of the entire state-controlled financial system during the first four months of 2017. 

The state-owned financial institutions, which combined have an unrivalled position in the country’s financial sector, posted Rs.35.21 billion in profits for the four months. 

The Ceylon Electricity Board (CEB), which had to resort to higher fossil fuel imports for thermal power generation during one of the worst droughts in the country’s history, contributed the highest towards the SoE losses with Rs.16.59 billion, escalating from Rs.5.78 billion year-on-year (YoY). 

The CEB’s cost per unit of generated electricity during the period increased to Rs.20.28 from Rs.17.54 YoY, while the lowest household consumption price is at Rs.7.85 per unit—and the Treasury had given a guarantee of Rs.6 billion to the CEB to ensure uninterrupted power supply to the national grid.  
The world crude prices, which have somewhat recovered in 2017 compared to early 2016, contributed to Ceylon Petroleum Corporation (CPC) making a loss of Rs.3.85 billion, compared to a profit of Rs.21.50 billion YoY. 

The government has yet to introduce cost-reflective formulas for both electricity and petroleum in order for the CEB and CPC to at least break-even.  

These prices are controlled as part of election goodies and the CEB’s request for a 5 percent increase in electricity prices last year was met with hostility from politicians. 

Losses at the national carrier SriLankan Airlines (SriLankan) spiralled to Rs.9.52 billion from just Rs.689 million YoY.  

The government has not managed to find either a management or equity partner for the ailing airline over two years after the fall of the previous regime, which had run SriLankan into the ground through nepotism, corruption and gross mismanagement, according to an investigation commissioned by the current administration. 

However, the cabinet ministers last month pointed fingers at the current director board of SriLankan for not attempting to strengthen the airline’s financial position.  

Meanwhile, the Sri Lanka Ports Authority (SLPA), which is under obligation to pay back the borrowings undertaken to construct the underperforming Hambantota port, made a loss of Rs.571.64 million, compared to a profit of Rs.4.47 billion YoY. 

All SoEs combined have made profits of Rs.8.15 billion so far in 2017 compared to a profit of Rs.49.78 billion YoY.

 
CPC was the largest indebted SoE with Rs.382.55 billion in borrowings, while the SLPA followed with Rs.237.66 billion. 

SriLankan and the CEB had Rs.91.59 billion and Rs.31.74 billion in debt, respectively. CPC, the CEB and SriLankan had significant treasury guarantees.