Ceylon Electricity Board Financial Performance – October 2018

Ceylon Electricity Board Financial Performance – October 2018 Contents 01. Financial Highlights - Key Statistics.….………………………………………….….…….2 02. Operating Performance Highlights………………………………………………………...3 03. Analysis of Financial Performance ……..…………………………..………..………........4 04. Revenue……………………….……..………………………………………………………………..6 05. Expenditure....……..……………………………………………………………….....……............9 06. Cost Analysis - CEB Plants ……………………………….……..………………………..…..11 07. Cost Analysis - Private Power Producers………………………………..……......……13 08. Budget Variance Analysis………………………………………………………..…….....…..14 09. Assets……………………………………….………………….………………….……...................15 10. Liabilities……………………………………….………………….………………….……............18 11. Key Financial performance Indicators…………………………………………….…….19 12. Observations & Recommendations………………………………………………………..20 13. Income Statement…….………………………………………………………….….....Annex 01 14. Balance Sheet ……………………………………..……………………………….….....Annex02 15. Reconciliation of Accounting Loss with cash Flow……………………..…Annex03

Ceylon Electricity Board Financial Performance 2018

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01.

Financial Highlights

2017 Cum. October Average Tariff (Rs./kWh) 16.19 Average Cost per Unit (Rs./kWh) 19.83 Gross Units Sold (GWh) 11,239 Energy Sales 181,921 Other Income 7,563 Direct Generation Cost (Rs.Mn) 158,201 1 CEB Thermal Oil 49,919 2 CEB Thermal Coal 33,197 3 IPP 54,299 4 NCRE 20,786 O & M Cost (without tax) (Rs.Mn) 39,633 Depreciation (Rs.Mn) 25,005 Profit /(Loss) (Rs.Mn) (33,356) Capital Expenditure (Rs.Mn) 33,827

2018 Cum. Budget October October 16.21 16.14 18.69 18.96 11,748 12,011 190,438 193,850 6,359 10,541 139,744 142,275 34,399 36,093 33,537 33,426 48,429 44,780 23,379 27,977 53,988 58,764 25,784 26,666 (22,719) (23,315) 36,176 122,495

Revised Annual Budget 16.14 18.89 14,343 231,489 12,649 165,355 42,141 38,975 49,863 34,377 73,588 32,000 (26,805) 122,495 Graphic I – Revenue & OPEX

Table I- Key Statistics Source –CEB Financial statements 2018 & MI Reports

Generation & Sales GWh

Generation Mix – September 2018 & 2017

2017

Graphic II – Generation & Sales

Graphic III – Generation Mix

Ceylon Electricity Board Financial Performance 2018

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02. Operating Performance Highlights 2018 October Capacity Charge

Energy Charge

2017 October

CEB - Hydro

4,064

31

7,227

-

7,227

1.78

2,203

18

6,631

3.01

CEB - Thermal

1,623

12

10,867

34,080

44,947

27.69

2,215

18

57,161

25.80

CEB - Coal

4,609

35

10,523

33,855

44,378

9.63

4,586

37

41,094

8.96

IPP - Thermal

1,538

12

12,404

35,424

47,829

31.09

2,144

17

54,299

25.33

NCRE

1,417

11

-

23,379

23,379

16.50

1,174

10

20,786

17.70

600

600

127,339

168,361 19,102

12.71 1.63

12,323 1,084

100 8.80%

179,972 15,835

14.60 1.41

Transmission Cost - Rs.

7,866

0.67

4,826

0.43

Distribution Cost - Rs.

37,763

3.21

31,187

2.77

5,527

0.47

6,855

0.61

219,517

18.69

222,839

19.83

Net Account./Net Plus Generation Cost 13,251 100 System Loss 1,503 11.35%

41,021

Corporate Cost - Rs. Cost Sales Units

11,748

11,239

89%

Average Selling Price (Rs./kWh)

Units (GWh)

(Rs./ kWh)

Units (GWh)

%

Total Rs. Mn

(Rs./ kWh)

Description

%

Rs. Mn

91%

16.21

16.19

Sales Revenue - Rs. Mn.

190,438

181,921

Other Income - Rs. Mn.

6,359

7,563

Total Revenue - Rs. Mn.

196,797

189,484

Profit /(Loss ) Rs. Mn

(22,720)

(33,355)

(1.93)

(2.97)

Profit / (Loss) Per Unit (Rs./kWh) Table II- Operating Performance Highlights

Source –CEB Financial statements 2018

Ceylon Electricity Board Financial Performance 2018

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03. Analysis of Financial Performance 3.1 Monthly Profit / (Loss) for 2018 While analyzing the historical pattern of profit yields of CEB, it is evident for the first half of the year CEB tend to generate downward trend in profits, with dry weather conditions whereas at the latter part of the year CEB is recovering with monsoon rains.

In the first quarterly financial performance of year 2018, continuous losses were incurred, with low levels of hydro generation. However the period of June to November (except July/Sep) were profitable with improved hydro conditions. (Refer Annex 1)

Graphic IV – Net Profit/ (Loss) 2018

Source –CEB Financial statements 2018

3.2 Historical Analysis of Profit / (Loss) As discussed above in the point No.3.1, the profit or loss of CEB in a particular year highly depends on the rainfall of that year. According to the past experience, if a year can have more than 35% contribution from hydro sources along with the full operation of Coal power plant, it will help to gain profits in that year assuming no any other major deviations.

Year Profit/(Loss) - Rs.Mn. Generation Mix as a % Hydro CEB Thermal - Coal CEB Thermal - Oil IPP NCRE Total Table III- Historical Profit Analysis

2013 12,849 50 12 11 17 10 100

2014

2015

2016

2017

(17,285)

20,955

(14,499)

(47,299)

29 26 14 21 10 100

37 34 8 9 11 100

25 36 17 15 8 100

21 35 18 17 10 100

2018 (Oct) (22,719) 31 35 12 12 11 100

Source –CEB Financial statements 2018 & MI Reports Ceylon Electricity Board Financial Performance 2018

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3.2.1 Contribution of Hydro Source

Graphic V– Financial Performance 2014-2018

Graphic VI – Hydro units 2014-2018

However with the escalation in commodity prices, namely fuel and coal, CEB was unable to relish on the improved hydro conditions as direct generation cost was escalating simultaneously with increasing demand (Year 2015 was profitable with Rs.20Bn net profits with comparatively less demand and therefore hydro generation was 37%).

Particularly the market prices of fuel keep on soaring and CEB has to endure the financial difficulties with the unchanged tariff structure since year 2013.

Ceylon Electricity Board Financial Performance 2018

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04. Revenue 4.1 Electricity Sales Revenue, Cost & Margin Analysis Year

No.of Units (GWh)

Avg.Tariff (Rs./kWh) 18.27 18.50 16.01 16.18 16.22 16.21

Sales Revenue* (Rs.Mn.) 194,147 202,645 188,684 206,811 218,450 190,438

Total cost (Rs.Mn.) 179,991 222,976 177,754 231,113 273,194 219,517

2013 2014 2015 2016 2017 2018 (Oct)

10,628 11,063 11,786 12,785 13,431 11,748

Table IV- Electricity Sales

Source –CEB Financial statements 2018 & MI Reports

Margin Profit/(Loss) (Rs.Mn.) per Unit Rs./kWh 14,156 1.33 (20,331) (1.84) 10,930 0.93 (24,302) (1.90) (54,744) (4.08) (29,079) (2.48)

*Considered only the electricity sales income.

It is evident that the cost is escalating at a rapid rate in the recent past with rising commodity prices and the financial management has become a tedious task with fixed tariff rates. In 2013 CEB yielded Rs.18.50/ kWh where as it was brought down nearly by Rs.2.50/ kWh with revised tariff structure announced in 2014.

4.2 Sales Category wise Analysis

Graphic VII – Category wise Tariff

Note: Since no value demonstrated for Street Lighting as it is embedded in all other tariff categories, the estimated number of units is also not shown in the above graph.

Ceylon Electricity Board Financial Performance 2018

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4.2.1 Sales Growth (YOY)

Units Sold (GWh) Sales (Rs.Mn) Table V- Revenue Analysis

2018 (Oct) 11,748 190,438

2017 (Oct) 11,239 181,921

Growth % 5 5

Source –CEB Financial Statements 2018 / System Control Report

4.2.2 Analysis of Sales Growth by Unit and Rate Variance Rs. Mn. Sales - 2017

181,921

Add Increase due to Unit Increase

8,240

Actual Sales @ 2017 Rate

190,161

Add Increase in Revenue due to Rate variance Sales - 2018 Table VI– Energy Sales

277 190,438

Source –CEB Financial Statements 2018 / System Control Report

4.3 Sales & Collection During the recent past, the average collection was 99% of sales made during that year. However, it is noted that there is a delay in collecting cash from long outstanding consumers mainly who are in the ‘more than 3 year’ bucket in the Debtors’ Age Analysis.

Ceylon Electricity Board Financial Performance 2018

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4.4 Subsidy and Surplus by CEB to Consumers

Graphic VIII – Subsidy/ surplus 2018

Source – CEB IT / CEB Financial statements 2018

Electricity tariff is offered at a price which is lower than the cost, to consumers at low consumption level in domestic category and most of the other categories excluding general purpose. Hence the high end consumers in domestic category/ general purpose category have to bear the part of this cost in excess. As at 31st October 2018, the total subsidy amounts to Rs.48 Bn and the surplus was recorded at Rs.19Bn before adjusting other income.

4.5 Other Income

Dividends declare for year 2018 by LECO (Pvt) Ltd and LTL Holdings (Pvt) Ltd will be recorded in November Financial statements approximating to Rs.2.1 Bn. Graphic IX – Other Income 2018

Source – CEB Financial statements 2018 Ceylon Electricity Board Financial Performance 2018

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4.6 System Energy Loss In the period under review Transmission & Distribution Losses was recorded at 11.35%. The estimated loss is given below: Division

Unit Loss (GWh)

Transmission

398

Generation cost Per unit (Rs./kWh) 12.71

Estimated Energy Loss (Rs.Mn) 5,051

Distribution

1,106

12.71

14,051

Total

1,503

12.71

19,102

Table VII – System Loss

05.

Source – CEB Financial statements 2018/MI Reports

Expenditure

5.1 Capital Expenditure

Capital Budget Percentage of CAPEX utilised

24%

Summary (Rs.Mn)

70,000

TOTAL CAPITAL BUDGET

60,000

122,495

50,000

TOTAL ACTUAL EXPENDITURE

40,000

36,176

30,000

TOTAL UNULTILIZED BUDGET

20,000

86,319

10,000

60,000 53,618

17,730 11,874

8,876 6,571

Borrowings

I.C.G.

Budget

C.C.

Actual

CAPEX utilization indicates slow progress over the period, even though the budget has been allocated among capital works to the full extent. In recent past the CAPEX utilization is less than 50% of the budgeted requirement and in 2017 it was 43%.

With the prevailing financial constraints, it is important to revisit the capital budget estimates by considering the priorities and the rate of utilization of projects.

Ceylon Electricity Board Financial Performance 2018

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5.2

Recurrent Expenditure

2018

Direct Generation Cost 64%

Others 6%

Dep 12%

Finance 2%

Personnel 13%

Direct Generation Cost 71% Others 5%

Dep 11%

Finance 2% Material 2%

Material 3%

Graphic X – Recurrent Expenditure

2017

Personnel 9%

Source –CEB Monthly Accounts 2018

5.3. Cost Analysis

Graphic XI – Expenditure

Source –CEB Monthly Accounts 2018

The total cost of the year under review is similar to the previous year, even though the direct generation cost is Rs.18Bn higher in year 2017 compared to this year. However operation and maintenance cost of year 2018 is comparatively high with the revised salaries.

Ceylon Electricity Board Financial Performance 2018

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06. Cost Analysis – CEB Plants 6.1 Cost per unit Summery – Thermal Plants (Rs./kWh)

Graphic XIII - Generation Cost per Unit

Source – Generation Division CPU statement 2018

6.2 Cost per unit – Thermal Plants (Rs./kWh)

KPS (GT) holds the highest finance cost and the total cost per unit is Rs.49.45/kWh. For the KPS (CCY) it was Rs.25.91/kWh during the period.

KPS GT- Kelanitissa Gas CCY - Combined Cycle

Coal cost per unit Ceylon Electricity Board Performance The Lakvijaya power plant recorded a cost per unit of Rs.9.58 in 2018 and itFinancial was recorded at 2018 Rs.8.88 in 2017. Increase of coal prices (including VAT) is the main reason for this variance.

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Graphic XIV - Generation Cost per Unit

Source – Generation Division CPU statement 2018

6.3 Analysis of Thermal Coal Contribution

Graphic XV- Generation Cost per Unit

Source – Generation Division CPU statement 2018

6. 4 Cost per Unit- CEB Hydro Plants Energy (Rs.) Complex

GWh

Spares

Capacity (Rs.)

Variable Personnel Unit Cost

Depn

Other Cost

2018 2017 Overhead Capacity (LKR/ (LKR/ (Indirect) Unit Cost kWh) kWh)

Mahaweli

2,187

0.03

0.03

0.38

1.24

0.07

0.09

1.77

1.80

3.93

Laxapana

1,281

0.05

0.05

0.39

0.71

0.04

0.12

1.26

1.31

1.74

Samanala

596

0.18

0.18

0.81

1.37

0.16

0.18

2.52

2.70

3.77

0.06

0.44

1.09

0.07

0.11

1.72

1.78

3.01

Overall Hydro

4,064

Table IX - Hydro Cost per Unit

0.06

Source – Generation Division CPU statement 2018

Ceylon Electricity Board Financial Performance 2018

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07. Cost Analysis - Private Power Producers 2018 Cost GWh (Rs. Mn) 1,538 47,828 1,420 23,379 2,958 71,208

Thermal Renewable Energy Total

(LKR/ kWh) 31.09 16.47 24.07

Table X – Direct Generation Cost- Private

2017 Cost (LKR/ GWh (Rs. Mn.) kWh) 2,144 54,299 25.32 1,174 20,786 17.71 3,318 75,085 22.63

Change Cost GWh (Rs. Mn) (606) (6,471) 246 2,594 (360) (3,877)

Source –CEB Financial statements 2018/ System Control Reports

07.1 Renewable Energy GWh Mini Hydro Wind Solar Others Total

910 305 67 138 1,420

2018 Cost (Rs. Mn) 13,800 6,232 1,551 1,796 23,379

(LKR/ kWh) 15.17 20.46 23.08 13.03 16.47

Table X – Direct Generation Cost- Private

2017 Cost (LKR/ GWh (Rs. Mn.) kWh) 718 10,669 14.85 337 7,609 22.55 118 1,174

2,507 20,786

21.28 17.71

Change Cost GWh (Rs. Mn) 192 3,131 (33) (1,377) 20 246

(711) 2,594

Source –CEB Financial statements 2018/ System Control Reports

7.2 IPP Thermal IPP

56 202 315 909 20 37 -

2018 Cost (Rs. Mn) 2,270 5,662 7,726 29,201 512 1,965 492

(LKR/ kWh) 40.83 27.97 24.51 32.13 26.20 53.40 -

1,538

47,828

31.09

GWh

Asia Power Sojitz Kelanitissa ACE Power Embilipitiya West Coast ACE Power Mathara Aggreko Northern Power Total

GWh 95 413 463 953 9.93 211 2,144

2017 Cost (LKR/ (Rs. Mn.) kWh) 3,836 40.58 9,628 23.30 10,571 22.84 28,795 30.23 224 22.56 559 686 54,299

25.32

Change Cost GWh (Rs. Mn) (39) (1,566) (211) (3,966) (148) (2,845) (44) 406 10 288 (174) 1,406 (194) (606)

(6,471)

Source –CEB Financial statements 2018/ System Control Reports

Table XI– Direct Generation Cost-IPP

Above statement does not incorporates the emergency power generated through Aggreko, and ACE Mathara for year 2017 , as the subsidy (given by Treasury )of Rs.6Bn has been adjusted to the cost.

7.3 Analysis of Energy cost and Capacity Cost of IPP thermal Capacity Charge Power Plant

GWh (Rs. Mn)

Asia Power 56 Sojitz Kelanitissa 202 ACE Power Embilipitiya 315 West Coast 909 ACE Power Mathara 20 Aggreko 37 Northern Power Total 1,538 Table XII– IPP cost analysis

990 419 783 8,617 95 1,008 492 12,404

Energy charge

Other charges

Total Cost

(LKR/ (LKR/ (LKR/ (Rs. Mn) (Rs. Mn) (Rs. Mn) kWh) kWh) kWh) 17.80 1,167 20.99 113 2.04 2,270 2.07 4,814 23.78 429 2.12 5,662 2.48 6,563 20.82 380 1.20 7,726 9.48 18,936 20.84 1,648 1.81 29,201 4.87 402 20.56 15 0.77 512 27.39 957 26.01 1,965 492 8.06 32,839 21.35 2,585 1.68 47,828

(LKR/ kWh) 40.83 27.97 24.51 32.13 26.20 53.40 31.09

Source –CEB Financial statements 2018 / System Control Repor Ceylon Electricity Board Financial Performance 2018

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08. Budget Variance Analysis 8.1.2 Category-wise O & M Cost Description

Actual 2018 Rs.Mn

Budget 2018 Rs.Mn

Actual 2017 Rs.Mn

Variance with Variance with Budget 2018 Actual 2017 Amount Amount % % Rs.Mn Rs.Mn 1,985 7 7,138 34 947 10 1,607 23 683 38 73 7 411 12 422 16 3,228 33 1,412 27 1,236 100 733 0 34 (2) 114 (6)

Personnel Material Accommodation Transport & Communication Other cost Material Price Variance Overhead Recoveries

27,839 8,559 1,130 3,032 6,625 (1,236) (1,661)

29,824 9,506 1,813 3,443 9,852 (1,627)

20,701 6,952 1,057 2,611 5,213 (1,969) (1,776)

Sub Total before Finance Cost Finance cost IPP Delay Interest CPC Delay Interest

44,287 5,731 1,461 2,508

52,811 3,996 1,957 -

32,789 4,076 1,283 1,486

8,524 (1,735) 496 (2,508)

16 (43) 25 -

11,499 1,654 179 1,022

35 41 14 -

Sub Total before Depreciation Depreciation Total

53,988 25,784 79,772

58,764 26,666 85,431

39,633 25,005 64,639

4,776 882 5,659

8 3 7

14,354 779 15,133

36 3 23

Table XIII – Operation & Maintenance Cost

Source –CEB Financial statements 2018 / Budget 2018

Based on the above Table XIII, it makes an understanding that there is over budgeting on expenditure. However, it is the normal situation of early months of every year and it will reduce the difference between budget and the actuals in the latter part of the year with recording of all the expenditure.

8.1.3 Division-wise O & M Cost

Description

Actual 2018 Rs.Mn

Budget 2018 Rs.Mn

Actual 2017 Rs.Mn

Generation Transmission Distribution Divison 01 Distribution Divison 02 Distribution Divison 03 Distribution Divison 04 Corporate Interest on Bank OD & Loans Interest on IPP Delayed Payments Interest on CPC Delayed Payments

10,206 2,823 6,779 9,886 5,728 5,051 3,815 5,731 1,461 2,508

15,248 3,386 7,904 10,170 5,131 5,019 5,954 3,996 833 1,121

6,616 1,770 5,809 7,674 4,106 3,893 2,919 4,076 1,283 1,486

Total

53,988

58,762

39,633

Table XIV – Operation & Maintenance Cost

Variance with Variance with Budget 2018 Actual 2017 Amount Amount % % Rs.Mn Rs.Mn 5,042 33 3,590 54 562 17 1,053 59 1,125 14 970 17 285 3 2,211 29 (596) (12) 1,622 39 (32) (1) 1,158 30 2,139 36 895 31 (1,735) (43) 1,654 41 (628) (75) 179 14 (1,387) (124) 1,022 4,774

8

14,354

36

Source –CEB Financial statements 2018 / Budget 2018

Note: Corporate cost includes cost of projects Division/AM Division and HQ. Corporate Strategy Division is captured under HQ. Ceylon Electricity Board Financial Performance 2018

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09. Assets 09.01 Inventory (Excluding Goods in Transit) The following table shows the level of inventory, consumption and stock holding period as at 30th October 2018.

Division

Generation

Balance As at 31.12.2017(Rs. Mn.)

Obsol & Average Stock Balance As at unserviceable Monthly Holding 31.10.2018 Stock Consumption Period (Rs. Mn.) (Rs. Mn.) (Rs.Mn.) in Months A* B C D=A/C

7,139

2

6

3,641

2

8

4,383

3,425

1.28

9

97

920

44

21

1

Spares Others

2,445 297

2,095 1,323

(16)

20 8

102 156

0.12 0.08

DD 01

6,378

7,532

(718)

862

9

1

DD 02

6,119

6,653

(383)

1,167

6

2

DD 03

3,463

3,221

(41)

982

3

4

DD 04

2,681

3,023

(103)

438

7

2

AM Transmission

69 85

75 181

(25) -

7 22

11 8

1 1

CEB

37,923

35,101

(1,285)

10,617

3

4

Coal

19,127

14,417

11,900

5,696

4,388

Oil - Fuel Oil - Lub Oil

(16)

Stock Turnover in times E=12/D

-

Note 01

Note 02

A* - Balance before adjusting obsolete & unserviceable Stocks and Price Variance.

Table XV- Inventory Source –CEB Financial Statements 2018

Note 01: In Generation Division, as the process of taking spares in to the inventory and the introduction of computerized spares management system is in progress; average monthly consumption is not entered due to the unavailability of accurate data.

Note 02: Average monthly consumption of Transmission Division shows the figure calculated for the year 2017. This figure is calculated only at the yearend stock verification

Graphic XVI- Stock Information

Source – CEB Financial statements 2018/MIR Reports 2018 Ceylon Electricity Board Financial Performance 2018

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Distribution Divisions maintain their stock turnover in between 1-4 times. However, every division needs to monitor their stocks including obsolete & unserviceable stocks properly in order to avoid unnecessary cash stagnating.

09.02 Trade Debtors – Age Analysis (Without Finalized Accounts)

Rs. Mn DD 1 DD 2 DD 3 DD 4 Transmission Total As a % of Total

As a % of Total

Total Debtors

33 28 14 12 12 100

6,577 5,588 2,765 2,348 2,416 19,694 100

Table XVI– Trade Debtors Age analysis

Rs. Mn Ordinary Supply As a % of OS Heavy Supply As a % of HS Total As a % of Total

As a % of Total

0-1 2-3 4-12 1-2 Months Months Months Years 3,947 3,096 2,116 2,037 1,362 12,558 64

73 100

904 520 156 165 1,745 9

295 364 31 24 714 4

79 258 11 (1) 346 2

Over 3 Years 212 58 26 2 299 2

Source –MI Reports

Total Debtors 5,353 100 14,341 100 19,694 100

27

1,139 1,292 426 120 1,054 4,032 20

2-3 Years

Table XVII– Trade Debtors Age analysis

0-1 2-3 4-12 1-2 Months Months Months Years 1,933 1,790 958 329 36 33 18 6 10,625 2,241 787 385 74 16 5 3 12,558 4,032 1,745 714 64 20 9 4

2-3 Years 91 2 254 1.77 346 2

Over 3 Years 250 5 48 0.34 299 2

Source –MI Reports

9.03 Trade Debtors- Receivable Position

Receivable Position (No of Months) - Without Finalized Accounts

2018 October Division

Ordinary Supply

Heavy Supply

Total

2018 September

DD 01

0.79

1.41

1.09

1.09

DD 02

0.44

1.42

0.95

0.91

DD 03

0.49

1.27

0.88

0.89

DD 04

0.54

1.35

0.88

0.85

Transmission

-

1.28

1.28

0.83

Total

0.59

1.36

1.00

0.95

Table XVIII– Trade Debtors Receivable Position

Source –MI Reports

Ceylon Electricity Board Financial Performance 2018

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Heavy Supply without Finalized Account

2018 October

2018

Total Dues (Rs. Mn)

Average Billing (Rs. Mn)

Government

1,985

894

2.22

2.22

Private

7,856

6,063

1.30

1.28

Semi Government

2,059

1,676

1.23

1.18

LECO

2,440

1,892

1.29

0.84

Total

14,341

10,525

1.36

1.26

Table XIX– Trade Debtors Receivable Position

No.of September Months

Source –MI Reports

10. Liabilities 10.01 Major Creditors Rs. Mn CPC IPP Thermal Renewable Energy Total

As At 31.10.2018 35,611 22,897 4,771 63,279

As At 31.10.2017 35,611 23,167 4,771 63,549

As At 31.12.2017 47,513 24,786 4,066 76,365

Table XX– Major Creditors by Source –CEB Financial Statements 2018

As a result of the weakened financial position in year 2018, payables to CPC and IPP thermal have increased significantly compared to previous year.

10.02 Borrowings 10.02.01 Bank Overdraft Bank Ovedraft - People's Bank OD Limit As at 31st December 2017 As at 31st October 2018 Table XXI– Bank Borrowings

Bank Balance Rs. Mn

Interest for the period Interest Rate Rs. Mn

(7,000)

(7,172)

846

14.37%

(800)

(1,516)

304

14.55%

Source –CEB Financial Statements 2018

Ceylon Electricity Board Financial Performance 2018

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10.02.02 Bank Loans Source

Granted Date

Principal Amount

Rs. Mn Interest Rate Balance as at Balance as at (%) 31.10.2018 31.12.2017

People's Bank

2-Apr-13

4,110

881

1,370

9.53

People's Bank

30-Jan-13

17,650

3,370

5,470

9.53

NSB

31-Dec-14

10,000

5,625

6,250

8.96

People's Bank

30-Apr-15

Euro 2087

2,676

2,610

9.03

People's Bank

30-Dec-16

5,000

1,250

3,750

14.52

People's Bank (for coal)

12-Dec-17

9,991

6,078

1,341

12.92

People's Bank (for CPC)

24-Jan-18

10,000

7,860

-

13.45

People's Bank (for OD)

1-Feb-18

6,200

5,591

-

-

People's Bank (for CPC)

1-Apr-18

10,000

10,000

-

-

People's Bank (for CPC)

2-May-18

15,000

15,000

-

-

People's Bank (for CPC)

3-Jul-18

10,000

10,000 68,331

Table XXII– Bank Borrowings

Source –CEB Financial Statements 2018

During the year 2018, CEB has obtained Rs.8,651 Mn. for coal purchases and Rs.45,000 Mn. for CPC/IPP settlements from People’s Bank. Further Rs.6,200 Mn has obtained to settle the tempory overdraft of Rs.7,000Mn to Rs.800 Mn (permanent OD facility).

11. Key Financial Performance Indicators I. Receivable Position (without Finalized Accounts) Division

Ordinary Supply (In Months)

DD 01 DD 02 DD 03 DD 04 Transmission Total

*Total Dues Average Billing

0.79 0.44 0.49 0.54 0.59

=

Heavy Total Dues Supply (Rs. Mn) (In Months) 1.41 1.42 1.27 1.35 1.28 1.36

6,577 5,588 2,765 2,348 2,416 19,694

Average Billing (Rs. Mn) 6,025 5,912 3,159 2,656 1,888 19,640

In Overall Months Ranking 1.09 0.95 0.88 0.88 1.28 1.00

5 3 1 1 4

Receivable Position

Ceylon Electricity Board Financial Performance 2018

P a g e | 19

II. Stock Holding Period

Division

Inventory (Rs. Mn.)

Average Inventory Consumption Turnover per month (in times) (Rs. Mn.)

Generation Transmission DD 01 DD 02 DD 03 DD 04 AM

14,417 181 7,532 6,653 3,221 3,023 75

7,139 22 862 1,167 982 438 7

Total

35,101

10,617

*Average Inventory Monthly Consumption

*12 Stock Holding periods in months

=

=

Holding period In Ranking Months

6 1 1 2 4 2 1 4

2 8 9 6 3 7 11 3

1 5 6 3 2 4 7

Stock Holding Period in months

Inventory Turnover in times

12. Observations & Recommendations 12.1 Impending Financial Difficulties for CEB 12.1.1 Observation When analyzing the history of financial performance of the CEB, it is observed that CEB is moving towards a financial crisis situation. Therefore it is vital to make the situation less aggravate to steady the financial position using following recommendations.

12.1.2 Recommendations a) In the Corporate Intent (2017-2019), which was prepared for all prominent State owned enterprises, CEB was allowed a 10% tariff increase from year 2018.

Nevertheless no tariff increase is approved since year 2013, and CEB is under a heavy financial burden. Therefore the government and the PUCSL (Public Utilities Commission of Sri Lanka) has to be persuaded for immediate implementation of the cost pass through tariff mechanism for CEB. b)

If above (a) cannot be persuade, request for the Government subsidy / or kind of financial assistance (Advance from the Treasury or low interest commercial loan) to conquer the present crisis situation.

Ceylon Electricity Board Financial Performance 2018

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12.2 Increased stock holding period 12.2.1 Observation When consider the stock holding period (in months), it was noted that Division 01,02, 04, held stock for nearly 09, 06 and 07 months. Further, it is important to take necessary action to remove obsolete and unserviceable stocks included in inventory, as in AM division, 32% of the stock is counted as obsolete and unserviceable stocks) 12.2.2 Recommendation It is recommended to pay due consideration for appropriate lead time and stock holding cost when procurements are made and action to be taken to remove obsolete material form the stocks. It is further recommended to set up benchmark and assign targets to each division.

12.3 Improvements in Trade debtor receivable position 12.3.1 Observation CEB maintains 0.59 (18 days) as the ordinary billing receivable position and 1.36 (41 days) as the bulk supply billing receivable position as at the end of the period under review. According to the existing billing and payment system, it is observed that it takes 03-04 weeks to update the system from the meter reading date which cause the delay in submitting actual sales in distribution divisions and duplicate the data entering process.

12.3.2 Recommendation It is recommended to further improve the bulk supply receivable position in all divisions and to develop a mechanism to accounts the billing information on line real time.

12.4 Utilization of CAPEX Budget and updating information 12.4.1 Observation Based on the figures of recent past , in year 2017, it is identified that the actual CAPEX utilization is less than 45% of budgeted requirements. Further, the information on capital expenditure against the budget is not received on time.

12.4.2 Recommendation More attention to be paid in providing information in a timely manner as the information is requested by the management as well as by third parties (MOPE, Treasury etc.) time to time. Further, it is important to revisit the Capital Budget estimates by considering the priorities and the rate of utilization of projects after six months to avoid forecasting errors Ceylon Electricity Board Financial Performance 2018

3,055

CEB Coal

(3,980)

(2,863)

-

-

(3,147)

Net Profit/(Loss) Afte r Tax

(4,527)

-

(3,147)

-

(4,527)

133

IPP/CPC delay charges Net Profit/(Loss) Before Tax

Taxation Other Comprehensive Income

155

151

391

566

(4,546)

(3,417)

554

22,373

6,593

4,855

21,519

2,541

Finance Cost

Other Income Net Profit Before Finance Cost

Total Cost Operating Profit/(Loss)

Depreciation Operation & Mainte nance Cost

2,536

320

240

- Corporate

335

2,409

186

1,323

988

- Distribution

570

- Transmission

O & M - Generation

15,780

(7,028)

(7,028)

210

514

(6,304)

570

(6,873)

25,435

7,083

2,568

313

2,827

303

1,071

18,352

(2,834)

-

-

(2,834)

180

416

(2,238)

602

(2,840)

21,589

7,144

2,558

374

2,780

333

1,098

14,446

(1,540)

-

-

(1,540)

151

543

(845)

671

(1,517)

20,942

7,111

2,613

390

2,765

381

963

13,831

71

-

71

1,967

588

2,625

542

2,083

17,335

7,143

2,605

368

2,772

308

1,091

10,192

(2,152)

-

-

(2,152)

174

883

(1,095)

532

(1,627)

20,568

7,214

2,603

445

2,946

91

1,130

13,354

2,936

153

-

-

153

109

658

920

689

230

19,471

6,715

2,510

458

2,663

283

802

12,756

3,023

4,546

3,130

2,056

19,702

Aug

5,575

4,210

2,471

19,932

Sep

1,906

3,583

1,404

19,782

Oct

(4,160)

-

-

(4,160)

777

810

(2,573)

1,003

(3,576)

23,508

8,802

2,611

671

3,598

308

1,612

2,444

-

-

2,444

114

777

3,334

630

2,704

17,077

7,413

2,640

235

3,360

297

882

9,664

14,706

16,663

3,920

5,353

2,838

2,226

18,941

Jul

113

2,888

2,721

2,288

1,263

19,418

Jun

487

1,675

4,137

3,429

3,377

19,425

May

Direct Generation Cost

1,314

5,128

3,283

4,360

18,750

Apr

2,659

1,418

6,880

4,125

6,032

18,561

Mar

1,962

1,584

5,510

3,594

5,258

17,827

Feb

2018 (Rs.Mn)

Renewable Energy Net Accounting/Net Plus

6,072

IPP Thermal

Purchased Power

5,953

18,101

CEB Fuel

Expenditure

Sales Revenue

Jan

Actual

3,830

-

-

3,830

61

655

4,546

888

3,658

15,476

6,611

2,401

363

2,729

275

843

8,865

73

2,484

1,733

2,876

1,700

19,134

Nov

(6,154)

-

-

(6,154)

196

918

(5,040)

2,854

(7,894)

27,676

11,021

2,667

884

7,471

16,654

56

2,484

6,096

2,601

5,417

19,782

Dec

Budget

(25,044)

-

-

(25,044)

4,226

7,304

(13,513)

10,101

(23,614)

252,968

87,704

30,852

5,061

30,173

3,098

18,520

165,264

729

28,347

55,658

-

39,014

41,516

-

229,354 -

Total

(47,299)

(1,338)

(231)

(45,730)

3,675

4,740

(37,314)

8,782

(46,096)

264,547

79,946

29,970

4,325

30,657

3,268

11,727

184,601

24,912

64,341

37,505

57,842

218,450

Annual 2017

P a g e | 21

Annex 01

Income Statement - For the Period ending 30th November 2018 and the forecasted values for the month of December

Ceylon Electricity Board Financial Performance 2018

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Balance Sheet- As at 31st October 2018 ASSETS

Annex 02 2018

2017

Rs.Mn

Rs.Mn

Non-Current Assets Property, Plant & Equipment -Cost

736,642

708,648

Investment in Subsidiaries

912

912

Investment in Joint Venture

329

329

Investments of Insurance Reserves Fund

7,942

7,111

Other Financial Assets

6,476

4,436

973

973

753,274

722,408

0.08

1,022

Inventories

33,459

27,511

Trade and Other Receivables Other Financial Assets

59,223 2,540

59,342 2,075

2,066

1,188

97,288

90,116

850,562

813,546

302,695

302,695

33,203

31,145

9,385

45,907

345,283

379,747

Other Non Current Assets Non Current Assets Held For sale Current Assets

Cash and Cash Equivalents Total Assets EQUITY AND LIABILITIES Capital & Reserves Contributed capital Reserves Retained Earnings /(Loss) Total Equity Non-Current Liabilities and Deferred income Interest bearing loans & Borrowings Consumer Deposits Provisions & Other Deferred Liabilities Deferred income

-

-

271,648

205,080

14,116

13,427

8,622

7,262

83,820

80,476

378,206

306,246

108,614

105,497

1,462

1,665

16,996

20,392

127,072

127,553

850,562

813,546

Current Liabilities Trade and Other Payables Income Tax Liabilities Interest Bearing Loans & Borrowings Total Liabilities Total Equity and Liabilities

Ceylon Electricity Board Financial Performance 2018

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Annex 03

Statement of Reconciliation of Accounting Loss with Cash Flow For the Period ending 31st October 2018 Rs. Mn Net Loss

(22,720)

Depreciation

25,784

Collection over Accrued revenue

2,975

Cash deficit

6,040

Loans Sub Total

59,849

59,849 65,888

(Settlement)/Deferment Direct Generation Cost: CPC

(11,827)

Coal

3,941

IPP

(2,743)

NCRE (Deferement)

631 Sub Total

(9,998)

Other Settlements Repayments of Loans Net investment in Capital Projects/Jobs/PPE Loans & Advances paid to staff Settlement of other operation & maintenance cost Sub Total Net cash flows during the period OD Balance as at 31.12.2017 (OD) Balance as at 31.10.2018

(16,206) 458 (5,713) (29,777) (51,239) 4,652 (7,172) (2,520)

Ceylon Electricity Board Financial Performance 2018