ECONOMYNEXT – Sri Lanka’s Ceylon Electricity Board has made a loss of 18 billion rupees in the March 2025 quarter, after the regulator forced a steeper tariff cut than proposed by the utility in the last revision.
The tariff cut by the regulator had delayed an International Monetary Fund program, which requires cost reflective prices for utilities and avoid further debt.
Sri Lanka breaches IMF benchmark after regulator cuts electricity prices
CEB also has to show profits to get loans to strengthen its grid to accommodate more renewable energy and avoid cascading power failures.
The CEB now has a larger share of intermittent renewables which have priority feed-in access and cannot be stopped like other private plants when demand falls.
Agencies like the Asian Development Bank which are prepared to lend the billions required to strengthen the electricity grid to absorb more renewable energy and build battery energy systems also require cost reflective tariffs to lend money.
CEB has proposed pump storage plants to cope with intermittent renewables.
Sri Lanka’s electricity generation costs came down sharply in 2024 after the central bank operated deflationary policy and allowed the rupee to appreciate bringing down the cost of imported coal and fuel.
The US Fed which is also operating a quantity tightening framework reducing excess liquidity in the US banking system after hiking rates since March 2022 has also brought down global energy (and food) commodity prices.
The CEB’s revenues plunged 44 percent in the March 2025 quarter to 93.9 billion rupees from a year ago, and cost of sales rose 6.8 percent to 112.1 billion rupees.
The CEB made a gross loss of 18.2 billion rupees in the quarter, compared to gross profits of 62.7 billion rupees last year when tariffs were high and the rupee appreciated steeply.
In the December quarter, before the tariff cut, the CEB also made an operating loss of 4.4 billion rupees, and its cost of sales were 116 billion rupees compared to revenues of 111 billion rupees.
CEB had then proposed a 3 percent cut.
In the March 2024 quarter the CEB sold a stake in a power plant to show a 26 billion rupees capital gain.
In 2025 there were also 3.9 billion rupees of other income.
The operating loss reduced to 15.5 billion rupees with other income.
Finance costs were 3.3 billion rupees down from 7.6 billion rupees. The CEB had used its profits in 2024 to reduce short term loans and bring down some of the operating costs permanently. The gains from the stake sale in the power plant was used to pay off IPP arrears.
At group level, which includes some stake in LTL Holdings, the net loss was 16.9 billion rupees.
Regulatory power cuts are made by gambling on rain, as CEBs stable renewable generation is the cheapest in the system.
A previous tariff cut enforced by the regulator in 2023 also led to a reversal under the IMF program after dry conditions.
CEB’s losses have been a significant threat to state bank finances and monetary stability in general as the central bank tends to print money to suppress its policy rate under its flexible inflation targeting, when SOEs borrow from government banks.
The currency depreciation that follows central bank money printing then worsens the losses of both the CEB and the Ceylon Petroleum Corporation, which are then blamed on the management of the energy utilities. (Colombo/May16/2025)
