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Friday December 8th, 2023

Sri Lanka CEB’s rating outlook lifted to positive by Fitch

ECONOMYNEXT – Fitch Ratings said it was lifting an outlook on state-run Ceylon Electricity Board to positive from stable, and was confirming a ‘B(lka)’ rating, which is currently de-linked from the state.

Fitch downgraded Sri Lanka’s long term local rating to ‘C’ from ‘CC’ on July 2023, but the CEB itself is rated higher at ‘B(lka)’

“This is because, despite the government’s selective default on some of its local currency debt, we do not believe CEB has entered a default or default-like process requiring a similar rating action,” Fitch said.

“In addition, CEB’s current rating already reflects a probable near-term default, as the company’s ability to service debt depends on the continuity of government support.”

The full statement is reproduced below:

Fitch Revises Outlook on Ceylon Electricity Board to Positive; Affirms at ‘B(lka)’

Fitch Ratings – Colombo – 12 Jul 2023: Fitch Ratings has revised the Outlook on Ceylon Electricity Board’s (CEB) National Long-Term Rating to Positive, from Stable, and has simultaneously affirmed the rating at ‘B(lka)’. Fitch also affirmed the National Long-Term Rating of CEB’s outstanding senior unsecured debentures at ‘B(lka)’.

The Positive Outlook reflects the likely upgrade of the Sri Lankan sovereign’s Long-Term Local-Currency Issuer Default Rating (IDR) to reflect the sovereign’s prospects following the completion of a domestic debt exchange (DDE).

We will equalise CEB’s ratings with that of the sovereign if the sovereign’s Long-Term Local-Currency IDR is upgraded to above ‘CC’, in line with our Government-Related Entities (GRE) Rating Criteria, resulting in a rating upgrade on the national scale.

This is based on our assessment of a strong likelihood of support from the state.

The affirmation follows our de-linking of CEB’s rating from that of the sovereign after we downgraded Sri Lanka’s Long-Term Local-Currency IDR to ‘C’, from ‘CC’ on 5 July 2023.

This is because, despite the government’s selective default on some of its localcurrency debt, we do not believe CEB has entered a default or default-like process requiring a similar rating action. In addition, CEB’s current rating already reflects a probable near-term default, as the company’s ability to service debt depends on the continuity of government support.


State Support Intact: The government continues to provide financial support to CEB to sustain its operations, which would have been otherwise challenging. The government converted a LKR200 billion project loan, amounting to 35% of CEB’s outstanding debt as at 30 September 2022, to equity late last year, while state banks continued to provide working capital funding to secure feedstock. The government has also facilitated uninterrupted fuel supply to CEB’s thermal power plants from state-owned Ceylon Petroleum Corporation (CPC), despite CEB having large dues to CPC.

We believe state support will be forthcoming, despite the state’s weak financial profile, as CEB fulfils an essential service for the country. A default of CEB would disrupt this service, as the company 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, as they are external arrangements with no clear alternatives.

Cost Reflective Tariff Mechanism:Indeterminate Standalone Profile: We don’t believe ascertaining standalone credit profile of CEB is possible in the foreseeable future, as its ability to operate depends on continued state support and it cannot be meaningfully delinked from the government.

CEB had LKR284 billion of debt equally spread across working capital and project loans as at end-April 2023. We expect CEB to generate negative free cash flow in the medium term, despite the tariff mechanism, and to depend on the state for expansion and refinancing.

We may provide a standalone credit view should CEB maintain a record of profitable operation that improves its access to external funding with less reliance on the state.

Large Dues to Operating Creditors: CEB owed LKR208 billion to CPC, IPPs and renewable energy generators as of end-April 2023, up by 20% from November 2022. CEB expects to settle its debt to CPC and some IPPs with support from the government, while the renewable producers will be settled incrementally with cash generated from operations. CEB plans to settle part of the dues owed to renewables producers through new funding lines, but approvals are taking time. Consequently, we do not expect a material reduction CEB’s trade payable position in 2023.

CEB Restructure: The government is looking at unbundling CEB’s generation, transmission and distribution process by transferring CEB’s resources to 14 companies established under the Companies Act as part of the country’s energy sector reforms.

We expect the unbundling to provide autonomy and flexibility for CEB operations, while improving its efficiency and competitiveness, but it is too early to ascertain how the proposed restructure would affect CEB’s credit profile, as the plan’s details are still vague.


CEB’s ratings reflect a probable near-term default, as it relies on the Sri Lankan government, which has begun a local-currency debt restructuring process, to continue its operations. However, CEB itself has not begun a default or default-like process.


Fitch’s Key Assumptions Within Our Rating Case for the Issuer
– Sri Lanka’s annual electricity demand growth to average 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 building new generation capacity


Factors that could, individually or collectively, lead to positive rating action/upgrade:
– the Sri Lankan sovereign’s Long-Term Local-Currency IDR being upgraded to above ‘CC’ after the completion of the DDE could result in corresponding action on CEB’s National Long-Term Rating.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
– the Sri Lankan sovereign’s Long-Term Local-Currency IDR being rated at ‘CC’ after the completion of the DDE would result in the Outlook on CEB being revised to Stable.

For the sovereign rating of Sri Lanka, the following sensitivities were outlined by Fitch in the agency’s Rating Action Commentary on 5 July 2023:

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

– Following completion of the DDE, the sovereign LTLC IDR will likely be lifted out of ‘RD’ to a rating that appropriately reflects its prospects.

– For the LTFC IDR, completion of the foreign-currency commercial debt restructuring that Fitch judges to have normalised relationship with private-sector creditors may result in an upgrade.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
– The LTLC IDR will be further downgraded once the government executes its domestic debt restructuring.


Liquidity Support from Government: CEB had LKR17 billion in unrestricted cash at end-March 2023, against LKR128 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 company’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 tariff and by securing new funding facilities from banks. 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.


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

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SLPP enjoying “great demand” from potential presidential candidates: Namal

FILE PHOTO – President Gotabaya Rajapaksa with nephew Namal at the opening of the last part of the Southern Expressway/PMD

ECONOMYNEXT – The ruling Sri Lanka Podujana Peramuna (SLPP) enjoys “great demand” from potential presidential candidates, and the party will have to take a call on working with incumbent President Ranil Wickremesinghe, MP Namal Rajapaksa said.

Speaking to reporters on Thursday December 07, Rajapaksa claimed several names have come up concerning the SLPP’s candidate at next year’s presidential election.

“There is great demand: entrepreneurs, businessmen, politicians, are all there. There are presidents too, ready to come forward with our party,” he said.

“Out of all these people, we will put forward on behalf of our party the candidate that can take the country forward while stabilising the economy,” he added.

Commenting on continued support for President Wickremesinghe, Rajapaksa said the while SLPP at present works with the former in the present government, the party will have to decide whether that relationship continues going forward.

“The matter of whether we work with the United National Party (UNP) in the future – this is not a politics dependent on individuals; the SLPP is a party. We will talk as a party with other parties, but no discussions will be held centred around individuals,” he said.

Rajapaksa noted that Wickremesinghe was the only member of parliament representing the UNP at the time of his election by parliament following the resignation of his predecessor Gotabaya Rajapaksa .

“If we are to collaborate with the UNP in the future, we’ll have to discuss that. Once the party has decided on that, we can get a start on those discussions. Today, we work with the president in the present government,” he said.

Last month, when asked to comment on President Wickremesinghe’s 2024 budget, MP Rajapkasa sounded rather sceptical of the president’s ambitions for turning the crisis-hit economy around.

“We must study the budget. He had presented a lot of these proposals in last year’s budget too. They don’t seem to have been implemented,” Namal Rajapaksa said, speaking to reporters after the budget presentation Monday November 13 afternoon.

Rajapaksa’s father and leader of the SLPP former president Mahinda Rajapaksa, however, spoke in favour of Wickremesinghe’s budget.


Sri Lanka’s “forward-looking” 2024 budget will instill fiscal discipline: MR

While not without its shortcomings, the older Rajapaksa said, the 2024 budget is a forward-looking one that aims to ensure fiscal discipline and put Sri Lanka on the path to recovery. (Colombo/Dec07/2023)

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Sri Lanka ruling party MP contradicts poll to claim his party is overtaking president’s

ECONOMYNEXT – The ruling Sri Lanka Podujana Peramuna (SLPP) is rising from the ashes albeit at a slower than anticipated pace, while President Ranil Wickremesinghe’s United National Party (UNP) still commands only 1-2 percent of the vote, an SLPP legislator said.

MP S B Dissanayake, who is not a member of the cabinet of ministers headed by President Wickremesinghe, told reporters on Thursday December 07 that support for any major political party of the island nation is on a downward trend while the SLPP alone is gaining ground.

An independent poll by the Institute for Health Policy (IHP) however shows that this is decidedly not the case. Polling data for October showed that the leftist National People’s Power (NPP) had enjoyed support from 40 percent of likely voters, having dipped 2 percent from September, while the main opposition the Samagi Jana Balawegaya (SJB) stood at 26 percent, increasing four percent from 22 percent in September. President Ranil Wickremesinghe’s UNP’s support decreased marginally to 11 percent in October from September’s 13 percent. The SLPP also saw a decrease to 5 percent from the previous month’s 8 percent.

“You can’t gamble with elections. The election must be held. We always say electrons must be held. The presidential election must be held next year. There is no alternative,” said Dissanayake.

“Parliamentary elections can be called if needed. But that’s not how it is with the presidential election. Nominations for that will have to be called by September, October next year,” he added.

Asked by a reporter if the SLPP is ready for elections, Dissanayake acknowledged that support for his party had eroded, to nothing.

“We crashed to zero. We were turned to ashes. But we will rise from those ashes. We’re not where we thought we were. The 6.9 million [votes received at the 2019 presidential election] no longer applies. We’re at about half of that. But we’re rising, like this,” he said, gesturing upwards.

“As other major parties go in the opposite direction, we’re rising slowly. But the UNP is not. It’s still on the ground, and still at 1 to 2 percent,” he claimed.

“The SLFP is there too. Those who left us are the same. Even together they cannot form 1 percent. But we’re climbing,” he said. (Colombo/Dec07/2023)

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Sri Lanka president appoints main opposition MP advisor

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has appointed MP Vadivel Suresh as a Senior Advisor aimed at “fostering the integration of Hill Country Tamils into Sri Lankan society”, the president’s office said.

A statement from the President’s Media Divison (PMD) said Suresh’s “pivotal role will centre around overseeing the comprehensive integration of Hill Country Tamils, particularly focusing on the districts of Badulla, Nuwara Eliya and Rathnapura”.

“The Senior Advisor will play a key role in coordinating various initiatives related to the welfare of Plantation Companies, the promotion of women, safeguarding children, addressing disparities in Tamil schools and upgrading the delivery of health services,” the statement said.

In May this year, Suresh, who represents the main opposition Samagi Jana Balawegaya (SJB) in parliament and also serves as the general secretary of the Lanka Jathika Estate Workers’ Union, made headlines when he issued an ultimatum to opposition and SJB leader Sajith Premadasa, demanding an apology for a perceived slight on the Indian-origin Tamil community that Suresh represents. He also spoke favourably of President Wickremesinghe, hinting at a possible cross over.

Sri Lanka’s Indian-origin Tamils, most of whom have historically worked in the plantation sector and live in dire conditions on wages widely considered unacceptably low. Speaking at a May Day rally, the Badulla district MP said Premadasa must apologise to the estate Tamils for allegedly snubbing them at an event in Madulsima that he failed to attend.

“I would like to say to our leader, sir, do not take us for granted,” said Suresh.

“If you need us to stay with you, come right now to Madulsima and apologise to my people and then we shall restart our journey. Otherwise I won’t be part of that journey. There will be no Vadivel Suresh. If you don’t apologise to my people, I won’t be with the SJB,” he said.

Making matters worse, the MP also expressed a willingness to join President Wickremesinghe if he was able to raise the daily wage of plantation workers and resolve their grievances. He also said the president has been successful in containing the disruptions caused by the currency crisis.

“On this May Day, we say to both the opposition leader and the president, I and my people would join hands with a leader that worked to increase [estate workers’] wages and give them [access to the Samurdhi welfare scheme] and include them in national policy,” he said. (Colombo/Dec07/2023)

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