• Act says only partial allocation
• 100% shares owned by Govt.
• Debt allocation to impact tariffs; no planned increase
• CEB’s total debt at Rs. 673.4 b

The State-run Ceylon Electricity Board (CEB) is planning to transfer its substantial billion-rupee debt to the company responsible for hydropower under the electricity reforms, The Sunday Morning learns. 

These reforms propose to maintain Government ownership of hydropower generation without opening it up to private investment.

Under current arrangements, it has been disclosed that the debt will undergo restructuring and be incorporated as an additional expense within the hydro unit.

The National System Operator (NSO) will purchase hydropower and distribute it to companies, it is learnt.

A senior State official emphasised to The Sunday Morning that the rationale behind adding the debt to hydropower generation costs was due to its current status as the most cost-effective generation method.

Despite an alternative proposal involving securing a loan to repay the debt over 20 years with a marginal increase in hydro costs, the finalised approach remains restructuring the debt directly into hydro costs.

When questioned as to whether it would increase electricity tariffs further, the official stressed that the debt allocation would pass on to the tariffs but that plans were to not increase tariffs.

Meanwhile, in response to inquiries about whether the recently approved funds from the Asian Development Bank (ADB) would be used to settle the debts, Power Sector Reforms Secretariat (PSRS) Head Dr. Pradeep Perera clarified that the focus remained on restructuring the debt rather than direct repayment.

As of now, the total debt owed by the CEB amounts to approximately Rs. 673.4 billion.

As outlined in a recent letter from CEB Acting General Manager Eng. Dr. Narendra De Silva to the Public Utilities Commission of Sri Lanka (PUCSL), the CEB reported staggering accumulated financial losses amounting to Rs. 412.1 billion from 2013 to 2023, with 2022 marking the highest annual loss at Rs. 203.5 billion.

Despite attempts to manage debts through tariff revisions, the board still grapples with major payable balances totalling Rs. 359 billion as of April this year, including substantial debts to entities such as Independent Power Producers (IPPs), Non-Conventional Renewable Energy (NCRE) developers, and various suppliers. 

The CEB also faces extensive loan obligations with banks and financial institutions, further underscoring its precarious financial position amidst ongoing operational challenges in Sri Lanka’s electricity sector.

In relation to the existing financial liabilities of the CEB, Section 18(3)(b) of the Sri Lanka Electricity Act No.36 of 2024 specifies that a portion of the said liabilities, which shall include supplier liabilities, be allocated to the successor company to which the hydropower generation assets of CEB will be assigned and which shall be a company of which 100% of the shares are held by the Government of Sri Lanka, and the balance portion of the said liabilities will be allocated amongst the other successor companies, in such proportions as shall be specified in the transfer plan.

As per the Schedule I of the Sri Lanka Electricity Act No.36 of 2024, currently managed hydro-electric, thermal, and renewable energy generation assets of the CEB will transition to newly formed corporate entities governed by the Companies Act No.7 of 2007. 

These entities include a Treasury-owned company for hydropower assets, another for coal power plants and the Lanka Coal Company, and separate entities for thermal generation and the CEB’s wind power plant. 

Additionally, companies with significant Treasury ownership will oversee the national grid infrastructure, electricity generation scheduling, and planning functions. Distribution divisions of the CEB will also be operated by separate companies, alongside entities managing residual CEB functions, including provident fund and pension management.

Meanwhile, The Sunday Morning also learns that over 4,000 assets owned by the CEB are currently undergoing evaluation by the Chief Government Valuer.

Attempts made to contact Power and Energy Ministry Secretary Dr. Sulakshana Jayawardena were futile.