Energy

Sri Lanka’s CEB ‘AA+(lka)’ rating confirmed with negative outlook

Friday November 20, 2020 4:00 pm

ECONOMYNEXT – Fitch Ratings has confirmed an ‘AA+’ state-run Ceylon Electricity Board with a negative outlook which is the same as the country’s sovereign rating.

“CEB’s ratings are equalised with that of its parent, the Sri Lankan sovereign (B-/Negative), in line with Fitch’s Government-Related Entities (GRE) Rating Criteria,” Fitch said.

“This is based on our assessment of a very strong likelihood of support from the state. CEB is the country’s monopoly electricity transmitter and distributor, accounting for around 75% of the power generation.

“Fitch assesses CEB’s standalone credit profile to be much weaker than its support-driven rating and believes providing a notch-specific standalone credit view of CEB is difficult due to poor margin visibility and the need for continued state support to sustain operations.”

The full statement is reproduced below:

Fitch Affirms Ceylon Electricity Board at ‘AA+(lka)’; Outlook Negative

Thu 19 Nov, 2020 – 9:18 PM ET

Fitch Ratings – Colombo – 19 Nov 2020: Fitch Ratings has affirmed Sri Lanka-based Ceylon Electricity Board’s (CEB) National Long-Term Rating at ‘AA+(lka)’ with a Negative Outlook.

We have also affirmed the National Rating on CEB’s proposed senior unsecured debentures at ‘AA+(lka)’.

CEB’s ratings are equalised with that of its parent, the Sri Lankan sovereign (B-/Negative), in line with Fitch’s Government-Related Entities (GRE) Rating Criteria.

This is based on our assessment of a very strong likelihood of support from the state. CEB is the country’s monopoly electricity transmitter and distributor, accounting for around 75% of the power generation.

KEY RATING DRIVERS

Very Strong State Linkages: Fitch believes CEB’s status, ownership and control by the Sri Lankan sovereign is ‘Very Strong’. The government fully owns CEB, appoints its board and senior management, sets tariffs and decides on its investment strategy. CEB fulfils an essential service for the state by providing electricity at subsidised rates.

We assess the support record as ‘Very Strong’ as we believe there is a high likelihood of state support for CEB. Government support to CEB has included direct grants, two-step loans from multinational agencies, which account for around 70% of its outstanding debt, equity injections and guarantees on bank loans for some of its investment projects and working-capital requirements. We expect the support to continue as the government would want to ensure uninterrupted power supply in the country.

Very Strong Incentive to Support: Fitch sees the socio-political implications of a default by CEB as ‘Very Strong’ as it would lead to service disruption since the board accounts for most of the country’s power-generation capacity.

A default would also make it difficult for CEB to source feedstock used for power generation such as heavy oil and coal, which are imported. CEB’s independent power producer agreements, which account for around 25% of the power generation, will also be affected as these are external arrangements with no clear alternatives and most of them use imported oil in their operations.

A default by CEB would have a ‘Very Strong’ financial effect on the state, as CEB’s project loans, which account for around 70% of its outstanding debt, are also the state’s obligations.

These loans are extended by bilateral and multilateral agencies and routed through the government for development of the country’s power infrastructure. Thus, a default on these project loans can be tantamount to a government default, dampening the state and its related entities’ ability to raise debt.

Weak Standalone Profile: Fitch assesses CEB’s standalone credit profile to be much weaker than its support-driven rating and believes providing a notch-specific standalone credit view of CEB is difficult due to poor margin visibility and the need for continued state support to sustain operations.

CEB continues to post operating losses in the absence of a cost-reflective tariff structure or an effective subsidy reimbursement mechanism. CEB’s current average tariff, which has not been revised since 2015, is around 20% below the average cost of supplying a unit of electricity.

Weak Financial Profile: We expect CEB to report EBITDA losses in the medium term, especially in the absence of an increase in tariffs and rising generation costs. We expect its low-cost hydropower generation to remain volatile in most years, which would require CEB to rely on high-cost thermal power, driving up costs.

We do not expect planned capacity additions from low-cost liquefied natural gas to come online before 2023. CEB had negative free cash flow (FCF) of LKR55 billion in 2019 on an EBITDA loss of LKR29 billion, high interest costs and significant capex.

Impact from Pandemic Manageable: We do not expect the pandemic to have a material impact on CEB’s operations as it is considered an essential service. CEB’s receivable collection was affected during the lockdown period of April to May, which has normalised since July. However, CEB had to absorb some of the relief measures extended by the government such as payment write-offs. The pandemic also helped CEB to reduce its generation costs amid lower electricity consumption, which was primarily met through low-cost generation sources, and a drop in global prices of coal and heavy oils.

Significant Investments: We expect CEB to invest heavily on new generation capacity and the upgrade of the transmission network to meet the country’s electricity demand, which the regulator expects to rise by 6% per year in the medium term. The government is considering increased private-sector participation in developing the power sector, but CEB will continue to play an active role, which would require material capital outlay. Most of these investments will be funded by low-cost project loans, but the additional debt burden would further weaken CEB’s balance sheet.

DERIVATION SUMMARY

CEB is a monopoly in electricity transmission and distribution and owns and operates the majority of the country’s installed power-generation capacity. It provides electricity at subsidised rates, fulfilling an essential service for the sovereign. CEB’s rating is equalised with that of the sovereign in line with our GRE rating criteria, where it is assessed as ‘Very Strong’ under each sub-factor score.

Sri Lanka Telecom PLC (SLT, AA+(lka)/Negative), another Sri Lankan GRE, has a stronger credit profile than the sovereign and its rating is capped by the state under the GRE criteria. SLT is assessed as ‘Strong’ for status, ownership and control because the state holds a majority stake in SLT directly and indirectly, and exercises significant influence over its operating and financial profile. We regard the record and expectation for state support for SLT as ‘Strong’, given its strategic importance in expanding the country’s fibre infrastructure. SLT has not required tangible financial support due to its healthy financial profile.

Fitch sees the socio-political implications of a default by SLT as ‘Moderate’ due to the presence of three other privately owned telcos.

However, a default could affect the fixed-line market because SLT acts as a policy company to invest in fibre networks across the island to support the government’s vision of fibre-based internet for all households. Fitch also sees the financial implications of a default as ‘Strong’, as a financial default by SLT may have an impact on the availability and cost of financing options for other GREs.

KEY ASSUMPTIONS

Fitch’s key assumptions within our rating case for the issuer include:

– Sri Lanka’s annual electricity demand growth to average 6% in 2021-2023

– No material increase in electricity tariffs in the next 12-18 months

– Generation mix to broadly remain at 32% coal, 30% fuel, 30% hydropower and 8% others.

– Capex of LKR100 billion per annum in 2021-2023 mainly on new generation capacity

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

– A revision of our Outlook on Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative

Factors that could, individually or collectively, lead to negative rating action/downgrade:

– A significant weakening in the likelihood of support from the sovereign

– A downgrade of the Sri Lankan sovereign’s Long-Term IDR could result in corresponding action on CEB’s National Long-Term Rating.

LIQUIDITY AND DEBT STRUCTURE

Government Supports Liquidity: CEB had LKR3.7 billion in unrestricted cash at end-June 2020 to meet LKR31.0 billion in debt due in the next 12 months. Around LKR12.0 billion of the debt consisted of working-capital lines, which we believe will be rolled over in the normal course of business.

The government has already settled some of the contractual maturities of multilateral loans on behalf of CEB and we expect state-owned banks to extend liquidity support, as and when required, amid CEB’s negative FCF generation.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS

CEB’s ratings are equalised with that of its parent, the Sri Lankan sovereign, in line with Fitch’s Government-Related Entities Rating Criteria.

Markets

Sri Lanka stocks close down 0.60-pct, dragged by HNB and LOLC

Friday November 13, 2026 3:28 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed down on Friday, CSE data showed, with the benchmark All Share Price Index moving down 0.60 percent.

The ASPI was down 133.22 points at 22,024.18, while the more liquid S&P SL20 was down 1.06 percent, or 67.55 points, at 6,298.02.

The ASPI ended the week up 784.53 points from last Friday.

Positive contributors to the ASPI were Dialog Axiata (up 0.40 percent at 50.20 rupees), Distilleries Company of Sri Lanka (up 0.52 percent at 58.30 rupees), Aitken Spence (up 3.60 percent at 151.00 rupees), Ceylon Tobacco Company (up 1.05 percent at 1,828.50 rupees), and LOLC Finance (up 1.96 percent at 5.20 rupees).

Hatton National Bank (down 1.88 percent at 403.75 rupees), Richard Pieris and Company (down 6.21 percent at 27.20 rupees), LOLC Holdings (down 2.17 percent at 405.00 rupees), Sampath Bank (down 1.91 percent at 154.00 rupees), and Singer (Sri Lanka) (down 2.40 percent at 77.30 rupees) were top negative contributors.

Market turnover was 3.23 billion rupees. Capital goods led turnover with 869.21 million rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka MP slams budget speech for omitting Tamil national question

Friday November 13, 2026 2:56 pm

ECONOMYNEXT – A Sri Lanka legislator has voiced strong disappointment that the President’s budget speech failed to make a single mention of the Tamil national question.

“It is very unfortunate that in His Excellency the President’s speech, there has not been a single word mentioned about the Tamil national question. Not a single word,” Shanakiyan Rasamanickam said.

“A budget speech generally, is a policy direction of the government for the next year. The budget speech is not only a statement of the country’s fiscal position or the economy’s position. It is the country’s, the government’s, plan, or what the government plans to do the following year. That’s a policy statement.”

Former presidents would at least mention the Tamil question even if it was not resolved, he said.

Former President Ranil Wickremesinghe in his speech, in his policy statement, he would mention: “The Tamil national question must be resolved,” Rasamanickam said.

Former Presidents Maithripala Sirisena and Gotabaya Rajapaksa also mentioned that the national ethnic question must be resolved, he added.

“Every President, every country’s Head of State, in their policy statements, have acknowledged the fact that there is an unresolved national issue, the Tamil national question, that it needs to be resolved. Various governments have proposed various mechanisms; none of them have succeeded, but at least it was mentioned.”

This year’s budget made allocations for the Office of Missing Persons, and the Office of Reparations.

“But the domestic mechanism is a mechanism that the victim community has rejected. So you all are allocating money to a mechanism where the victim community is not going to be part of.”

Last year’s budget 1 billion was allocated to be spent on the Trincomalee and Jaffna airports.

“Where was that 1 billion for the Trincomalee and Jaffna airports spent last year?”

“The trajectory of this government, Honourable Deputy Speaker, is worrying to me. It’s really worrying to me. Because if the objective is to say that there is no Tamil national question, if the objective is to say that you all have resolved any ethnic issue that this country faced, then Honourable Deputy Speaker, then I think the Tamil people will teach this government a very, very, very harsh lesson in the future.” (Colombo/Nov13/2026)

Bonds & Forex

Sri Lanka sells extra Rs6.5bn Treasury bills after auction

Friday November 13, 2026 12:32 pm

ECONOMYNEXT – Sri Lanka has sold 6,500 million rupees of treasury bills offered on tap at an average rate of 9.95 percent, the public debt management office said, bringing the total of bills sold in the week to 85.562 billion rupees.

The issue offered 90 billion.

Total market subscription was 6.5 billion rupees.

The debt office sold a 12-month bill at 9.95 percent.

On Wednesday (11) the debt office raised 79 billion rupees of 3, 6 and 12 month bills after offering 90 billion.

The settlement date is November 13. (Colombo/Nov13/2026)

Construction and Real Estate

Access Engineering Sept quarter group net profit surges 200-pct to Rs4.75bn

Friday November 13, 2026 12:15 pm

ECONOMYNEXT — Sri Lanka’s Access Engineering PLC recorded a group net profit attributable to equity holders of Rs. 4.75 billion for the quarter ended September 30, surging 200 percent from Rs. 1.58 billion a year earlier, interim accounts showed.

Basic earnings per share rose to Rs. 4.08 for the September quarter, up from Rs. 1.58 previously.

Quarterly group revenue expanded 36 percent to Rs. 20.39 billion from Rs. 14.94 billion, underpinned by condominium property handovers — reflected in inventories dropping Rs. 7.69 billion since March to Rs. 35.71 billion — alongside strong automobile sales and steady civil engineering execution.

Cost of sales rose at a slower 27 percent to Rs. 14.34 billion, lifting gross profit by 64 percent to Rs. 6.05 billion and expanding gross margins to 29.7 percent from 24.7 percent.

Other income jumped 144 percent to Rs. 259.9 million, while administrative expenses rose 75 percent to Rs. 1.14 billion, leaving operating profit up 64 percent at Rs. 5.16 billion.

However, finance costs more than doubled, rising 107 percent to Rs. 1.18 billion on elevated group borrowings of Rs. 43.74 billion, partly offset by finance income climbing 302 percent to Rs. 42.2 million.

Share of results from equity-accounted investees rose 122 percent to Rs. 26.7 million, pushing pre-tax profit up 56 percent to Rs. 4.05 billion.

Income tax swung to a net reversal of Rs. 186.6 million from an expense of Rs. 804.1 million, boosted by deferred tax assets on unrelieved losses from a 100 percent enhanced capital allowance claimed by 60 percent-owned radiopharmaceutical subsidiary Access Medical Tracers (Private) Limited.

Total period profit rose 136 percent to Rs. 4.24 billion, with non-controlling interest declining 24 percent to Rs. 164.9 million following last year’s buyout of minority shareholders in Harbour Village (Private) Limited.

No separate exchange gain or loss was itemized in quarterly earnings, though foreign currency translation via associates recorded a Rs. 17.4 million loss in other comprehensive income, alongside USD 16.6 million in corporate guarantees.

Notes also flagged an expected Rs. 1.45 billion recovery from the terminated South Asia Commercial and Logistics Hub project, a Rs. 225 million post-quarter legal settlement already provided for, and a Supreme Court appeal over a 2011/12 PAYE tax ruling.

Group assets stood at Rs. 132.4 billion as of September 30, with net asset value per share at Rs. 46.70, as the Employees’ Provident Fund raised its stake to 5.69 percent.

Access Engineering shares closed at 80.00 rupees at the end of September and are currently trading around 85.80 rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka private sector says timely implementation of Budget 2027 key

Friday November 13, 2026 11:43 am

ECONOMYNEXT – Private sector body, The Ceylon Chamber of Commerce, said it was encouraged by the broad direction of Budget 2027, noting that it reinforces Sri Lanka’s commitment to economic transformation while maintaining policy continuity, macroeconomic stability, and fiscal discipline.

“This continuity is particularly important as the country seeks to transition from economic stabilisation to a more durable, investment-led growth trajectory.”

The chamber also noted several areas where the Budget could have placed greater emphasis to strengthen the country’s growth prospects.

“In particular, there is a need for a stronger focus on attracting Foreign Direct Investment (FDI), accelerating factor market reforms, particularly in land and labour, and fast-tracking public procurement reforms to improve the efficiency and speed of project implementation.

“More targeted and actionable proposals could have been introduced to unlock the potential of sectors with significant growth opportunities, including tourism, agriculture, IT/BPO and logistics.”

The chamber said the budget contains positive measures aimed at enhancing competitiveness, and external sector resilience, while presenting opportunities for focus on sectors that can accelerate growth.

“A number of the key structural reforms identified in last year’s Budget have been carried forward and strengthened, providing greater certainty and predictability to businesses and investors.

“These include the continued implementation of the Trade National Single Window (TNSW), the phased removal of para-tariffs, the rollout of the Digital ID framework, efforts to expand market access through new Free Trade Agreements (FTAs), the strengthening of one-stop-shop investment facilitation mechanisms, progress on Customs reforms, the expansion of Bandaranaike International Airport (BIA), enhanced financing support for SMEs, and reforms relating to the management of State-Owned Enterprises.”

The CCC said that more than 20 proposals submitted by it have been reflected in Budget 2027.

These include measures to strengthen investor facilitation through the establishment of a professionally managed investment promotion agency; continued efforts to improve trade facilitation and export competitiveness; the Government’s consideration of a successor programme with the International Monetary Fund (IMF); accelerated progress on key legislative reforms; the expansion of digital government services; and the promotion of cashless payments and broader digital adoption. The Budget has also captured several priorities relating to energy security, including the accelerated deployment of Battery Energy Storage Systems (BESS) and investments in fuel storage infrastructure, initiatives to optimize underutilized agricultural land, measures to support the expansion of the digital economy and the IT/BPO sector, and tax reforms to support exporters, including the acceptance of newly VAT-registered exporters as eligible exporters.

“The inclusion of these priorities reflects the value of sustained public-private dialogue and demonstrates increasing alignment between national policy objectives and the needs of a competitive, export-oriented economy.

“The priority now must be effective and timely implementation to translate policy commitments into investment, competitiveness, exports and sustainable growth.” (Colombo/Nov13/2026)