Central Bank annual report, 2018 says: CPC and CEB incurred a combined loss of Rs. 132.9 Billion

By Sandun A Jayasekera

The Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB), the most vital and largest state owned commercial ventures in the country incurred a combined loss of a massive Rs. 132.9 billion in 2018, the Central Bank annual report, 2018 says.   

Commenting on the financial performance of the CPC, the Central Bank in its annual report has said the CPC’s financial situation has deteriorated substantially during 2018, amidst rising global oil prices, depreciation of the rupee against the US dollar and the non-adjustment in domestic retail prices until May 2018.   

Accordingly, the CPC has reported an operational loss of Rs. 104 billion in 2018, compared to a profit of Rs. 3.4 billion in 2017. Depreciation of the rupee against the US dollar resulted in a loss of Rs. 82.7 billion to the CPC during 2018, while lower demand from the power generation sector also contributed to the reduction in revenue of the CPC. 

Although there was a notable increase of rupee deposits of the CPC with state banks, from Rs. 5.0 billion at end 2017 to Rs. 67.9 billion at end 2018, total gross liabilities to the banking sector increases by Rs. 116.2 billion to Rs.293.2 billion during the year largely reflecting the impact of the US dollar denominated borrowings by the CPC.   

Further, the CPC’s outstanding trade receivables from government entities decreased by Rs. 10.4 billion to Rs. 81.7 billion in 2018, compared to 2017. As at end 2018, the CEB and SriLankan Airlines (SLA) accounted for 58.3% and 31.3%, respectively of total trade receivables of the CPC.   

On the CEB, the Central Bank has said that the financial performance of the CEB remained weak in 2018. Although hydropower generation improved considerably during 2018, it was not sufficient to offset the losses incurred on account of high cost thermal power generation. According to the unaudited provisional financial statements, the CEB recorded a loss before tax of Rs. 28.9 billion in 2018, in comparison to Rs. 46.0 billion loss in 2017. The low fuel oil requirement for power generation, driven by increased hydropower availability, reduced the CEB’s cost on fuel significantly by 28.2 per cent, to Rs. 41.6 billion in 2018. Hence, the overall average cost of electricity at the selling point reduced to Rs. 19.13 per kWh in 2018 in comparison to Rs. 20.06 per kWh in 2017, while the overall average tariff as at end December 2018 was Rs. 16.30 per kWh, compared to Rs. 16.49 per kWh the previous year.   

Although the average cost of electricity at the selling point fell during the year, it remained above the overall average tariff, indicating the need for cost reflective pricing in the sector. As at end 2018, the average electricity tariffs charged by the CEB from domestic, general purpose, government, industrial and hotel sectors were Rs. 13.60, Rs.23.78, Rs. 18.24, RS.14.72 and Rs. 17.61 per kWh, respectively. Meanwhile, short-term liabilities of the CEB, primarily to the banking sector, the CPC and IPPs, increased to Rs. 141.1 billion by end 2018, from Rs. 138.0 billion at end 2017. Long-term liabilities of the CEB, which are mainly to the banking sector, increased to RS.392.2 billion at end 2018 from Rs. 319.6 billion at the end of 2017. The weak financial position of the CEB and the considerable strain it casts on the balance sheet of the state banks highlight the need for the implementation of plans for the expansion of power generation through less costly sources without delay in addition to the urgent need to introduce a cost-reflective pricing mechanism for electricity.   

The performance of the CEB remained weak in 2018. Although hydropower generation improved considerably during 2018, it was not sufficient to offset the losses incurred on account of high cost thermal power generation