Bonds & Forex

Fitch upgrades Ceylon Electricity Board to BB+(lka) after Sri Lanka rupee rating lift

Tuesday October 10, 2023 2:25 pm

ECONOMYNEXT – The local currency rating of state-run Ceylon Electricity Board was upgraded to to BB+(lka) from B(lka), Fitch Ratings said, after an earlier upgrade of the rupee rating of the Sri Lanka government to CCC+ from restricted default.

“CEB’s ratings are equalised with that of its parent, the Sri Lankan sovereign, based on our assessment of a ‘Very Strong’ likelihood of state support under our GovernmentRelated Entities (GRE) Rating Criteria,” Fitch said.

“We expect the support to continue, despite the state’s weak financials, as CEB fulfils an essential service on behalf of the state.

“In 2022, the government implemented a formula based tariff mechanism, to be revised bi-annually, to ensure CEB can cover its operating costs and interest obligations.

“Prior to this, CEB supplied electricity significantly below cost, resulting in large accumulated losses and an unsustainable capital structure.

“We will monitor the consistent application of the cost-reflective mechanism, which should allow CEB to breakeven at the cash flow from operations level and improve its Standalone Credit Profile (SCP).”

The full statement is reproduced below:

Fitch Upgrades Ceylon Electricity Board to ‘BB+(lka)’; Outlook Stable

Fitch Ratings – Colombo – 10 Oct 2023: Fitch Ratings has upgraded Ceylon Electricity Board’s (CEB) National Long-Term Rating and the rating on CEB’s senior unsecured debentures to ‘BB+(lka)’, from ‘B(lka)’. The Outlook is Stable.

The upgrade follows the 28 September 2023 upgrade of the Sri Lankan sovereign’s LongTerm Local-Currency Issuer Default Rating (IDR) to ‘CCC-‘, from ‘Restricted Default (RD)’.

CEB’s ratings are equalised with that of its parent, the Sri Lankan sovereign, based on our assessment of a ‘Very Strong’ likelihood of state support under our GovernmentRelated Entities (GRE) Rating Criteria.

CEB is Sri Lanka’s monopoly electricity transmitter and distributor and accounts for around 75%
of the country’s power generation.

KEY RATING DRIVERS

‘Very Strong’ State Linkages and Support Record: We believe CEB’s 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 its investment strategy. Government support to CEB includes two-step loans, which account for around 20% of CEB’s outstanding debt, debt to equity conversions and taking over certain liabilities. We expect the support to continue, despite the state’s weak financials, as CEB fulfils an essential service on behalf of the state.

‘Very Strong’ Support Incentive: We see the socio-political implications of a CEB default as ‘Very Strong’. A default would disrupt services, because CEB accounts for most of Sri Lanka’s power-generation capacity. It would also make it difficult for CEB to source imported feedstock for power generation, such as heavy oil and coal. CEB’s independent power producer (IPP) agreements, which account for around 20% of the power generated, would also be affected, with no clear alternatives. Most of the IPPs use imported oil in their operations.

We also believe a default would have a ‘Very Strong’ financial effect on the state, as CEB’s project loans also comprise state obligations. These loans are extended by bilateral and multilateral agencies and are routed through the government for the development of the country’s power infrastructure. A default of CEB’s outstanding debentures would also limit the ability of other state entities to tap capital markets for funding.

Cost Reflective Tariff Mechanism: In 2022, the government implemented a formulabased tariff mechanism, to be revised bi-annually, to ensure CEB can cover its operating costs and interest obligations. Prior to this, CEB supplied electricity significantly below cost, resulting in large accumulated losses and an unsustainable capital structure. We will monitor the consistent application of the cost-reflective mechanism, which should allow CEB to breakeven at the cash flow from operations level and improve its Standalone Credit Profile (SCP).

Indeterminate SCP: We do not believe that ascertaining an SCP for CEB is possible in the near-term, as the company’s ability to operate depends on continued state support and it cannot be meaningfully delinked from the state. CEB had LKR288 billion of debt as at end-June 2023, after the government took over almost LKR200 billion of projects loans in 2022. We expect CEB to generate negative free cash flow in the medium term, despite the cost-reflective tariff mechanism, and to depend on the state for expansion and refinancing. We may provide a standalone credit view should CEB maintain a sustained record of profitable operations that reduce reliance on the state.

Weak Operating Performance: We do not believe cash flow from operations will be sufficient to cover CEB’s interest obligations in 2023, despite a 150% tariff increase. This is due to the reduced contribution from low-cost hydro power generation during the year, which compelled CEB to purchase emergency power at higher costs to meet the shortfall. At the same time, energy demand has risen with the gradual recovery of economic activity. CEB has requested an off-cycle tariff hike to cover its increased costs, but it is yet to be approved.

Large Trade Creditors: As of end-August 2023, CEB owed LKR212 billion (June 2023: LKR208 billion) to state-owned Ceylon Petroleum Corporation (CPC), IPPs and nonconventional renewable energy (NCRE) generators. The government plans to take over 70% of the dues to CPC and the IPPs by end-2023 to ease the burden on CEB. Dues to NCREs stand at 10-11 months at present, and CEB plans to settle them gradually with operating cash flow. CEB’s payables may rise in the short-term if the proposed off-cycle tariff hike is not approved.

Planned Restructuring to Boost Efficiency: The government plans to unbundle CEB’s generation, transmission and distribution assets across 14 companies established under the Companies Act, as part of Sri Lanka’s energy sector reforms. The bill proposing the restructuring will be presented to parliament in October 2023 approval. We expect the unbundling to provide CEB with autonomy and flexibility, while improving its efficiency and competitiveness. However, it is too early to ascertain how the restructuring will affect CEB’s credit profile, as the plan’s details are still vague.

DERIVATION SUMMARY

CEB has a monopoly in electricity transmission and distribution. It owns and operates the majority of installed power-generation capacity in the country. CEB’s rating is equalised with that of the sovereign, in line with our GRE criteria, as we assess linkages and support incentives as ‘Very Strong’ under each sub-factor score.

KEY ASSUMPTIONS

Fitch’s Key Assumptions Within Our Rating Case for the Issuer
– Sri Lanka’s annual electricity demand growth to average at around 6% over 2023-2026
– Generation mix to remain at 50% thermal, 30% hydro and 20% other over 2023-2026
– Tariff to be adjusted every six-months to cover CEB’s operating costs and interest obligations
– Annual capex of LKR90 billion over the next two years for maintenance and new generation capacity

RATING SENSITIVITIES

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

– An upgrade of the Sri Lankan sovereign’s Long-Term Local-Currency IDR could result in corresponding action on CEB’s National Long-Term Rating.
Factors that could, individually or collectively, lead to negative rating action/downgrade:

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

For the sovereign rating of Sri Lanka, the following sensitivities were outlined by Fitch in the agency’s Rating Action Commentary on 28 September 2023:

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

– The Local-Currency IDRs would be downgraded if further restructuring or a default on local-currency debt becomes probable due to an unsustainable debt burden or inability to raise revenue.

– The Long-Term Foreign-Currency IDRs are at the lowest level and cannot be downgraded further.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

– A sustained decline in the general government debt-to-GDP ratio that is underpinned by strong implementation of a medium-term fiscal consolidation strategy and improved growth performance.

– Completion of the foreign-currency commercial debt restructuring that Fitch judges to have normalised the relationship with private-sector creditors may result in an upgrade.

LIQUIDITY AND DEBT STRUCTURE

Liquidity Support from Government: CEB had LKR7.0 billion in unrestricted cash at end-June 2023, against LKR86 billion in debt due in the next 12 months. More than 90% of the outstanding debt is for working capital, which we believe will be rolled over in the normal course of business. We believe the government will continue to provide funding support for CEB to meet its contractual maturities amid the board’s weak liquidity.

CEB also has significant payments due to feedstock suppliers, including CPC and IPPs. CEB plans to settle the debt by using additional cash flow from the increased electricity tariffs and by transferring some of the debt and liabilities to the government. CEB received LKR80 billion in funding in 2022 from the Ministry of Finance to settle its dues to CPC, and we expect similar liquidity support from the government, given the essential service that CEB provides.

ISSUER PROFILE

CEB is the sole electricity transmitter and distributor in Sri Lanka and is a fully owned state entity. It accounts for 75% of domestic electricity generation through its network of hydro and thermal power plants.

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 GRE criteria

Markets

Sri Lanka stocks close up 1.37-pct, banks lead turnover

Monday November 9, 2026 3:29 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed up on Monday, CSE data showed, with the benchmark All Share Price Index moving up 1.37 percent.

The ASPI was up 291.72 points at 21,531.37, while the more liquid S&P SL20 was up 1.67 percent, or 100.96 points, at 6,146.34.

Positive contributors to the ASPI were Commercial Bank of Ceylon (up 2.86 percent at 216.00 rupees), Hatton National Bank (up 1.52 percent at 399.75 rupees), Asiri Hospital Holdings (up 12.86 percent at 31.60 rupees), Tokyo Cement Company (up 5.22 percent at 84.70 rupees), and Access Engineering (up 3.93 percent at 81.90 rupees).

Carson Cumberbatch (down 4.24 percent at 712.00 rupees), Richard Pieris and Company (down 2.43 percent at 28.10 rupees), LOLC Holdings (down 0.62 percent at 400.00 rupees), Renuka Holdings (down 2.63 percent at 37.00 rupees), and Chevron Lubricants Lanka (down 0.61 percent at 204.25 rupees) were top negative contributors.

Market turnover was 3.33 billion rupees. The S&P/CSE Banks Industry Group led turnover with 667.76 million rupees.

The session saw heavy crossings, according to Raynal Wickremeratne, Head of Research and Strategy at NDB Securities. Significant crossings included Keells (23 million rupees), Distilleries Company (27.7 million rupees), Sunshine Holdings (30.6 million rupees), Commercial Bank (32.4 million rupees), Ceylon Tobacco Company (35.6 million rupees), Hatton National Bank (39.5 million rupees), Prime Lands (40.5 million rupees), and HAS Holdings (41.5 million rupees).

In corporate news, Hayleys Retail Holdings Ltd announced it has partnered with supply chain software provider Blue Yonder to build and scale an AI-native grocery supermarket chain across Sri Lanka. (Colombo/Nov09/2026)

Information Technology

Sri Lanka’s Hayleys Retail to launch supermarket chain with Blue Yonder

Monday November 9, 2026 3:12 pm

ECONOMYNEXT — Hayleys Retail Holdings Ltd has selected supply chain software provider Blue Yonder to build its grocery retail operations from the ground up, the two companies said in a joint statement.

Hayleys Retail, a member of Sri Lanka’s diversified conglomerate Hayleys Group, plans to open several stores in the near future to serve consumers across the country. The agreement marks Blue Yonder’s first retail customer in Sri Lanka.

“Our entry into supermarket retail is about bringing that same commitment to quality and reliability closer to everyday Sri Lankan consumers,” Mohan Pandithage, Chairman and Chief Executive of Hayleys PLC said.

“With Blue Yonder, our teams will have AI-driven insight to deliver a seamless, consistent shopping experience across every store,” he said.

Hayleys, which accounts for approximately 5 percent of Sri Lanka’s export income and operates across 17 business sectors, is entering the large-scale supermarket space by drawing on its group strengths in manufacturing, logistics, and services.

The company selected Blue Yonder to connect its data across merchandising and shelf space, deploy artificial intelligence agents to catch operational issues early, and scale its business into a national network without changing platforms.

The rollout will begin with merchandise operations to manage suppliers, items, costs, and pricing, followed by machine learning capabilities to forecast demand and balance store inventory during seasonal peaks.

“Hayleys Retail is choosing one where AI is the foundation rather than an add-on—connected data and agentic AI built into core merchandising operations, and planning that learns as the business grows,” Antonio Boccalandro, President, APAC at Blue Yonder said.

The retailer plans to use the platform to automate routine store tasks and adjust inventory according to real-time sales and local market trends as its store footprint grows. (Colombo/Nov09/2026)

Stocks & Companies

Sri Lanka’s Citrus Leisure extends Lotus Tower management pact

Monday November 9, 2026 1:16 pm

ECONOMYNEXT – Sri Lanka listed hospitality firm Citrus Leisure said it has extended an agreement to manage consumer-facing and entertainment spaces at the Colombo Lotus Tower, which includes revolving restaurant Blue Orbit, until June next year.

The initial agreement signed between Citrus Leisure and Colombo Lotus Tower Management Company (Private) Limited (CLTMC) is due to expire on December 11.

“The Board of Directors of CLTMC at meeting held on 2nd November 2026 has resolved to extend the term of the Management Agreement and continue the existing Management Agreement until 30th June 2027, to which the company has given its concurrence,” the company said in a market filing.

Citrus Leisure Plc opened its revolving restaurant at the Lotus Tower in December 2023.

The company signed a 3-year agreement with CLTMC in May 2023 to provide services in the management of (l) the banquet hall 1 on the 25th floor, (2) the banquet hall 2 on the 26th floor, (3) the revolving restaurant on the 27th floor, (4) the 6 suites situated on the 28th floor and the kitchen in the basement floor of the Colombo Lotus Tower.

The 350-meter or 1,150-feet tower, the tallest in South Asia, was built at a cost 104.3 million US dollars with 80 percent of the money borrowed from Exim Bank of China.

Located in the commercial heart of Colombo, the tower has been called a symbolic landmark of Sri Lanka as well as a colossal white elephant and has been mired in controversy for years. (Colombo/Nov9/2026)

Markets

CIC Holdings Sept quarter net profit rises 20-pct to Rs1.7bn

Monday November 9, 2026 11:50 am

ECONOMYNEXT — Sri Lanka conglomerate CIC Holdings recorded a net profit of 1.66 billion rupees for the quarter ended September 30, rising 20.3 percent from 1.38 billion rupees in the same quarter last year, interim accounts showed.

The group posted basic earnings per share of 0.87 rupees for the September quarter, up from 0.73 rupees a year earlier.

Quarterly revenue grew 3.4 percent to 20.89 billion rupees from 20.20 billion rupees, supported by broad-based growth across industrial solutions, livestock, and healthcare segments, which counterbalanced relative demand moderation in agricultural inputs.

Cost of sales rose 5.3 percent to 15.20 billion rupees, outpacing revenue growth and causing gross profit to contract marginally by 1.2 percent to 5.68 billion rupees.

Results from operating activities dropped 7.3 percent to 2.66 billion rupees from 2.87 billion rupees, impacted by higher operating overheads.

Selling expenses expanded 6.8 percent to 2.15 billion rupees, and general and administrative expenses climbed 5.8 percent to 1.07 billion rupees, while other operating income dropped 29.6 percent to 117.40 million rupees.

However, operating profits were cushioned by an impairment reversal on trade receivables of 85.83 million rupees, turning around from an impairment provision of 23.38 million rupees in the corresponding quarter last year.

Net finance costs climbed 35.4 percent to 712.25 million rupees from 526.01 million rupees.

The increase was driven by a 30.8 percent rise in finance expenses to 771.46 million rupees, primarily reflecting higher interest expenses on loans to finance elevated working capital and inventory requirements.

The quarter’s bottom line was strongly bolstered by CIC’s equity-accounted investment in John Keells Holdings PLC (JKH).

Share of profit from equity-accounted investees surged more than fourfold to 590.50 million rupees from 257.87 million rupees, driven by JKH’s strong profit expansion during the period.

The group also recognized a gain on bargain purchase of 55.59 million rupees during the quarter resulting from additional share purchases in JKH where the proportionate net asset value exceeded acquisition cost, compared to no such gain a year earlier.

With associate income gains offsetting operating margin contraction and higher borrowing costs, group pre-tax profit held virtually flat at 2.59 billion rupees, down 0.11 percent.

Income tax expense fell 29.4 percent to 606.24 million rupees from 858.71 million rupees, driving total group profit for the period up 14.1 percent to 1.98 billion rupees.

Total group assets stood at 108.58 billion rupees as of September 30, up from 99.75 billion rupees at the end of March 2026.

Group net asset value per share increased to 25.52 rupees from 22.10 rupees a year earlier.

CIC Holdings’ ordinary voting shares closed at 27.80 rupees at the end of September.(Colombo/Nov09/2026)

Fitch upgrades Ceylon Electricity Board to BB+(lka) after Sri Lanka rupee rating lift

Sri Lanka stocks close up 1.37-pct, banks lead turnover

Sri Lanka’s Hayleys Retail to launch supermarket chain with Blue Yonder

Sri Lanka’s Citrus Leisure extends Lotus Tower management pact

CIC Holdings Sept quarter net profit rises 20-pct to Rs1.7bn

Sri Lanka stocks trend up; ASPI gains 0.78-pct

Sri Lanka rupee at 332.54/58 to US dollar spot, bond yields steady