Renewable energy players experience payment delays up to 7 months from CEB

• While large-scale players could withstand stretched working capital cycle, small players are forced to exit sector

The private renewable energy producers are seeing payment delays up to seven months or more, which has significantly stretched their working capital cycles, as the Ceylon Electricity Board (CEB) is mired in a massive debt pile amid facing a rupee shortage, due to its persistent large-scale losses. 

According to ICRA Lanka Limited, WindForce PLC, Sri Lanka’s largest non-conventional renewable energy producer, has seen the receivable days increasing up to 211 days in the nine months through December 2021, from 140 days through March 2021. 

Meanwhile, Vidullanka PLC, which is into hydro, solar and biomass-based power generation, also saw its receivable days expanding up to 210 days in the nine months to December 2021, from 184 days in the financial year ended in March 2021. 

While the country is facing its worst economic crisis triggered by the foreign exchange shortage, the CEB is facing a massive scale rupee shortage, also due to the losses it incurs from every unit of electricity it sells. 

As a result, there is a strong consensus among the policymakers of both sides of the isle and also in civil society that tariffs must be raised at least to cover the cost and the government can no longer subsidise electricity or any other utility for that matter. 

It was only a fortnight ago that the employees of the renewable energy sector took to the streets calling for imminent settlement of what is due from the CEB, which they claimed to be as high as Rs.23 billion.  The non-settlement of these dues have in turn stretched the finances of at least 7,000 workers employed in the sector, as they see innumerable challenges in meeting their mortgage payments and making their ends meet. 

In a rating report on WindForce, ICRA Lanka said the management has been actively engaging in discussions and negotiations with the regulators for a payment plan. 

However, the rating agency said given the company’s large-scale operations, it is in a better position to absorb the disruptions into its working capital cycle, as opposed to the smaller-scale players, who are forced to exit the sector. 

WindForce is into wind, solar (rooftop and ground solar) and mini hydropower plants, with a total installed capacity of 222 MW in both Sri Lanka and abroad. 

Meanwhile, in the case of Vidullanka, ICRA Lanka said by December 2021, only 50 percent of the company’s receivables are from the CEB and thus comparative to their peers, they are also in a better position to absorb any further delays by the CEB. 

The current power crisis facing the country for its fifth month since February has drawn the attention of the authorities and officials to expedite the approvals for renewable energy generation and new investments in the sector to both avert a similar crisis in future by cutting reliance on fossil fuel as well as to reduce generation cost. 

However, the whole episode also brought to light the officialdom operating in the CEB and power sector, which has so far prevented investments into the sector by wilfully delaying the approval process and instead favouring emergency purchases of very expensive thermal power from private power producers, it was revealed last week.