Sri Lanka’s proposed electricity price increase for the second time in five months by around 60 to 65 percent in accordance with the pricing formula has resulted in a tug of war due to the single handed protest of Public Utilities Commission chairman Janaka Rathnayake.

Following the power play between the Public Utilities Commission, Ceylon Electricity Board (CEB) and the Power and Energy Ministry, the subject Minister Kanchana Wijesekera yesterday explained the current status of the sector surrounding the inability to provide continuous power supply during GCE Advanced Level examinations.

Citing five points via Twitter, he underscored the ground realities of the situation.As of 30 January, the Minister listed down the CEB’s outstanding amounts to key organisations which include; Ceylon Petroleum Corporation Rs. 112 billion, renewable energy suppliers Rs. 40 billion, rooftop solar providers Rs. 4 billion, private power plants Rs. 80 billion, monthly bank loans interest Rs. 10 billion and Rs. 35 billion for coal payments for February.

“The CEB drained available water resources for power generation to have no power cuts at the beginning of 2022 which resulted in 4-6 hour power cuts mid-year. Economic crisis, cash flow management issues and inefficiencies led to fuel shortages that made things worse,” he pointed out.

He also claimed that some politically motivated elements are working towards creating shortages in the fuel supply and further power supply shortages.

“Politically, the most difficult decision for a Government that is facing an election to take is tariff hikes and increase in taxes, which the Government has done,” he added.

Minister Wijesekera said during the time the Government is expediting the reforms needed to make CEB and CPC efficient and cut down on cost ─ it is a must to have cost-reflective pricing for both.

In addition, he noted that a clear plan for an uninterrupted power supply for 2023 has been submitted by CEB to PUCSL at end of 2022 and to other relevant authorities.

“The CPC pricing mechanism has made it financially stable to run its operations in the last few months without depending on the Central Bank and Treasury.

But with the continuous burden on CPC by CEB it will make it impossible for CPC to sustain and make payments timely for a continuous supply,” he explained.

Chairman of the Public Utilities Commission of Sri Lanka (PUCSL), Janaka Rathnayake says that legal action will be initiated regarding the officials who have failed to implement a decision given by an independent commission.

Furthermore, Mr. Ratnayake highlighted that he needs only to carry out the duties of the commission independently with no political ties, adding that he receives the required support from the other members of the commission for that purpose.

“The CEB is going to obtain Rs. 100 billion from the people who have been stuck in economic issues, who are using 30-60 units of electricity, Mr. Ratnayake said, mentioning that it is an unfair process.

“We will proceed with the proposal that we have calculated in a fair manner. We will not give away this to CEB as requested”, he emphasized.

The PUCSL Chairman further emphasized that the independent commissions are there to properly manage and regulate these matters, but political interferences are being carried out in each and every activity.

Sri Lanka’s capital market is set to regain momentum with improvements on the macroeconomic side and once the economic reform process gets going, with external funding lines getting activated, resulting in better performance, equity market sources revealed.

The capital market of Sri Lanka consists of government securities, stocks, and corporate bonds. All financial instruments have a combined value of about USD 66.3 billion as of July 2020. Government securities contribute the most, with about 63% of the economy, available official data showed.

Foreign investors are to be attracted by market valuations, with selective buying of stocks with strong fundamentals and growth potential despite the unfolding economic challenges.

The trend may continue if there is an improvement in the economic climate in 2023 which will then attract more foreign inflows into the capital market, finance ministry officials said.

A lot will also depend on how the listed companies perform: their financial results at the end of the year and their earning projections for 2023, and we are hopeful of improved performance in the coming year, Colombo Stock Exchange official said.

Market valuations are attractive because our market PE is lower than some of our peers, particularly when compared with other emerging and frontier markets, which makes the Sri Lankan capital market attractive.

However, the country’s sovereign credit rating is holding back investors to a degree. If we can persist with the economic reforms agenda, we believe foreign investors would be ready to take on the opportunities offered by the low valuations, he added.

From a business perspective, the high-interest rate regime and dampened investor sentiment are some of the negatives.

Meanwhile capital Advisory Services, a boutique investment bank in Sri Lanka achieved a historic milestone of a Rs. 1 billion in footprint in the first month of 2023 with a landmark deal in the agriculture sector.

CAS, was the sole facilitator and advisor to Nilvin View Tea Factory, (a member of the KDU group, one of the largest tea producers to the nation) in securing strategic long-term financing for capacity expansion.

CAS has been instrumental in raising capital, both in the form of debt and equity for Sri Lankan corporates and SMEs since its inception in 2020.

CAS Managing Director Lakshman Kariyawasam, a veteran in Sri Lankan capital markets said: “I saw a substantial vacuum in the capital market space, with very large corporates in the agricultural and manufacturing sectors, not having access to Capital Markets and Foreign financing as freely as the financial sector players.”

“Whilst their balance sheet was healthy and strong, they lacked the know how to access capital markets. I saw this as an opportunity for us to work with them in accessing local capital markets and foreign funding,” he added.

CAS said it has now grown to be a force to be reckoned with in the Sri Lankan capital markets and will continue its mission of “Capital Market inclusion” for the untapped sectors in Sri Lanka.

Colombo (LNW): Diversified blue chip John Keells Holdings (JKH) yesterday reported impressive growth in revenue and operating profit for the third quarter but profit before tax (PBT) was impacted by much higher interest costs in comparison to a year earlier.

JKH said 3Q witnessed the continuation of normal day-to-day consumer and business activity, supported by continued political and social stability and less disruptions on account of the macroeconomic challenges.

The Group revenue grew in 3Q by 27% to Rs. 68.24 billion and by 47% to Rs.208.82 billion in the first nine months of FY23. Group earnings before interest expense, tax, depreciation and amortization (EBITDA) grew by 9% to Rs.10.41 billion in 3Q.

JKH Chairperson Krishan Balendra m in his review accompanying the 3Q interim results has urged the authorities to expedite the implementation of much needed public sector reforms, including privatization.

He noted that this was done by countries when faced with similar challenges in the past, to address the structural and governance issues of the economy to achieve long-term sustainable growth and emerge from this economic crisis stronger.

He stresses improved productivity, investment in better technology through collaboration and reduction of expenditure to better ensure more competitive and comparable cost of production of energy and other utilities on sustainable manner utilities in a sustainable manner.

“These reforms will also aid the Government in raising revenue through investment while ensuring better collaboration, technology and knowledge transfer in key industries,” he emphasized.

JKH Chief acknowledged that the progress made thus far in implementing the difficult, yet necessary, reforms and initiatives to revive the economy and overcome the worst economic crisis faced by the country is noteworthy and is required for fiscal consolidation.

“Whilst it would understandably curtail consumer spend and activity in the short to medium term, the stability and confidence in achieving fiscal consolidation will lead to a more sustained recovery,” he added.

In his review Balendra also acknowledged the Government’s announcement on several significant policy actions and reforms aimed at achieving fiscal consolidation and reaching sustainable debt levels.

He also noted increases in corporate income tax and indirect tax rates with effect from 1 October 2022, together with upward revisions in personal income tax rates and the reintroduction of withholding tax mechanisms being made effective from 1 January 2023.

He also noted the Government’s announcement of a second revision to electricity tariffs which will further reduce the cost of subsidies to the Government and improve state revenue.

“The full impact of these measures on consumer disposable incomes and spending is yet to be seen.

The measures taken to improve the fiscal position of the Government are necessary at this juncture. However, these increases will impact consumer disposable incomes as well as inflation, including increasing the operating costs of businesses,” Balendra cautioned.

The JKH Chairperson said that while revenue increases through tariff adjustments will boost Government revenue in the short term, the sustainable solution, and need, is to ensure improved productivity, investment in better technology through collaboration and reduction of expenditure to ensure a more competitive and comparable cost of production of energy and other utilities.