Apr 13, 2010 (LBO) - Units of Sri Lanka's state petroleum and power utilities could be listed in the Colombo Stock exchange to broad base their ownership and make them more transparent and accountable, the Central Bank has said.
Last year the state-run Ceylon Petroleum Corporation had lost 12.3 billion rupees partly due to subsidizing Ceylon Electricity Board, the state power utility.
"[A] profit centre concept covering various key activities of the CPC, such as refinery, agro chemicals, and aviation fuel supply may be implemented to improve the financial viability of the CPC," the Central Bank said.
"With a view to improving the accountability and transparency of operations, these business units could be diversified, through a possible offering of certain minority stakes of shares to the general public, in order to broad base the ownership through a listing in the Colombo Stock Exchange."
The CPC is overstaffed but generates large volumes taxes for the government through energy sales. Its losses primarily come from arbitrary government interference in retail prices and its inability to raise prices to match import costs.
A periodically adjusted price formula was needed to match international prices, the Central Bank said.
The CPC also has a weak governance structure with both the chairman and chief executive being politically appointed. In 2008 it defaulted on an oil derivative, whose losses are estimated at around 600 million US dollars, it entered in a bid to fix prices.
The Ceylon Electricity Board, a state power monopoly had lost 7.4 billion rupees in 2009, down from 33.3 billion in 2008.
Already a profit center concept for key areas such as hydro power, thermal power, transmission and distribution have been identified.
"The profit centre concept will help to improve productivity and achieve maximum efficiency, cost saving and thereby improve the profitability of the CEB," the Central Bank said.
"With the improvement of the balance sheet of the CEB and to enhance the accountability and transparency of its operations the authorities may consider listing the CEB in the Colombo Stock Exchange to broad base its ownership and provide the general public the opportunity to hold a minority stake of its share capital.
"At the same time, CEB’s financial management system need to be strengthened with an improved financial management system.
"Access to data in a timely manner would improve the decision making process of the CEB."
CEB's losses stem primarily from being overly dependant on high cost liquid fuel power plants for base load.
The government is now building a coal power plant with Chinese financing to reduce generation costs over the long term.
source - www.lbo.lk
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