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 local-currency 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.
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. (Fitch)
