CEB’s cash flow adequate to service debt – Fitch

Ceylon Electricity Board’s (CEB, BB+(lka)/Stable) cash flow will stay adequate to service debt despite a 22.5% tariff cut from July 16, 2024, Fitch Ratings says. The agency does not expect the latest cut to affect the Sri Lankan electricity distributor’s payments to independent power producers (IPPs).

Lower tariffs are supported by falling generation costs from CEB’s higher mix of hydropower and lower coal prices yoy. Financing costs will also fall amid lower market interest rates.

Following the tariff cut and assuming unchanged tariffs and costs for the rest of the year, we estimate CEB’s EBITDA margin will narrow to about 11% in 2024, from the 26% in 2023 reported in its preliminary accounts. EBITDA interest coverage will fall but remain sufficient at 1.8x (2023: 3x), helped by declining market interest rates.

“We believe, if required, CEB has the flexibility to reduce annual capex by about LKR20 billion, to LKR 70 billion during 2024-2025, in line with the previous three years, to mitigate the impact of lower tariffs. This will help maintain EBITDA net leverage at a healthy 3x.”

The post CEB’s cash flow adequate to service debt – Fitch appeared first on DailyNews.