CEB’s Sept. quarter profit down 98% YoY as margins erode

• QoQ performance weakens on falling revenue amid steady costs

The Ceylon Electricity Board (CEB) has recorded a near-elimination of profit for the quarter ended 30 September, with earnings, margins, and operating performance deteriorating year-on-year (YoY) and quarter-on-quarter (QoQ) amid rising generation costs, tariff pressures, and weakening cash flows. 

Interim financial statements released this week also showed the utility slipping into a Rs. 9 billion loss for the nine months to end-September, compared to a Rs. 152 billion profit in the same period of 2024.

Revenue fell 30% YoY to Rs. 321.7 billion, while cost of sales rose 1% to Rs. 322.9 billion, resulting in a gross loss of Rs. 1.2 billion compared to a gross profit of Rs. 129.2 billion a year ago. 

Administrative expenses rose 20% to Rs. 10.3 billion, while net finance costs fell by half to Rs. 11.4 billion. Loss before tax for the period was Rs. 7.3 billion, compared to a profit of Rs. 153.7 billion a year earlier. 

Retained losses stood at Rs. 361.5 billion on a balance sheet with Rs. 1.3 trillion in total assets. The notes to the financial statements said restructuring was underway in line with the Sri Lanka Electricity (Amendment) Act, No. 15 of 2025.

The CEB’s Profit After Tax (PAT) for the September quarter fell 98% YoY to Rs. 466.5 million from Rs. 29 billion a year earlier. On a QoQ basis, profit dropped 94% from Rs. 7.4 billion in the June quarter. 

Revenue for the September quarter was Rs. 120 billion, down 5% year-on-year but up 15.8% quarter-on-quarter. However, cost of sales rose 13% year-on-year and 27.7% quarter-on-quarter to Rs. 117.8 billion. 

Gross profit fell to Rs. 2.4 billion, an 89% decline from a year earlier and a 79% drop from the June quarter. Operating profit declined 94% year-on-year to Rs. 2.2 billion and fell 82% quarter-on-quarter, reflecting rising administrative costs and shrinking other income.

The September quarter marked the continuation and deepening of the deterioration seen from early 2025. 

In the quarter ended 31 March 2025, the CEB posted a loss after tax of Rs. 16.93 billion, a 119.2% decline from the Rs. 88.3 billion profit a year earlier. 

Revenue fell 45.5% to Rs. 98 billion, while cost of sales rose 2.6% to Rs. 112.9 billion, generating a gross loss of Rs. 15 billion compared to a gross profit of Rs. 69.7 billion a year ago. Operating profit fell 114.4% to a loss of Rs. 14 billion owing to a sharp reduction in other income and valuation gains.

In the June 2025 quarter, profit after tax fell 78% year-on-year to Rs. 7.4 billion. Revenue declined 31% to Rs. 103.6 billion, while cost of sales fell 18% to Rs. 92.2 billion, allowing a gross profit of Rs. 11.4 billion, down 69% from Rs. 37 billion a year ago. 

Operating profit fell 70% to Rs. 12 billion, reflecting continued pressure on non-operating income streams.

Cost of sales includes the cost of generation, operating power plants and purchasing power from independent producers, but excludes salaries, transmission overheads, administration, interest and depreciation of the grid.

According to the Finance Ministry’s Mid-Year Fiscal Position Report 2025, CEB was the single largest drag on overall State-owned enterprise profitability in the first half of the year. 

The utility recorded a Rs. 13.2 billion loss in the first six months of 2025 compared to a Rs. 119.2 billion profit a year earlier. Electricity sales revenue fell 38.8% to Rs. 192.6 billion despite a 4.3% increase in demand to 7,814 GWh. 

The Treasury said the sharp contraction was driven by lower tariffs, with average sales revenue per unit falling to Rs. 24.64 per kWh from Rs. 41.97 a year earlier. 

Direct generation costs declined 8.7% to Rs. 144.3 billion due to favourable hydrological conditions, though this was insufficient to offset the steep revenue fall. Trade payables rose to Rs. 52.6 billion by end-June, including Rs. 19.8 billion owed to independent power producers.

Two tariff revisions in 2025 resulted in a 20% tariff reduction in January and a 15% increase in June. 

Meanwhile, the Sri Lanka Electricity (Amendment) Act, No. 14 of 2025 established four Government-owned entities for generation, transmission, distribution and the national system operator as part of the CEB’s unbundling.

In October 2025, the IMF urged Sri Lanka to maintain momentum on energy-sector reforms under the Extended Fund Facility. Mission Chief Evan Papageorgiou said unbundling and cost-recovery tariffs were essential to prevent a return to losses that would burden taxpayers. 

He said predictable tariff-setting creates conditions for lower electricity prices over time and confirmed the IMF is evaluating the CEB’s latest tariff submission to the regulator, including the end-November benchmark on revising the tariff methodology.

The collapse in 2025 comes after two strong years driven by tariff adjustments. 

According to CEB’s 2023 annual report, biannual tariff revisions lifted revenue 97% to Rs. 606.6 billion and helped return the utility to a Rs. 61.2 billion profit after a Rs. 298 billion loss in 2022. 

The CEB remained profitable in 2024 with Rs. 148.6 billion in earnings even after tariff reductions of 21.9% in March and 22.5% in July, though monthly profits weakened in late 2024. Another 20% tariff reduction in January 2025 raised concerns over the continued cost-reflectivity of the pricing mechanism.

The sharp financial contraction seen across all three quarters of 2025, combined with the nine-month loss and declining margins, indicates that tariff reductions without corresponding reductions in generation cost have pushed the CEB back into structural stress. 

The full-year outlook remains weak unless tariff policy, hydropower conditions or generation costs shift materially in the final quarter.

According to energy-sector analyst Dr. Vidhura Ralapanawe, (https://www.ft.lk/columns/Electricity-tariffs-Accounting-clawbacks-and-meddling-by-IMF/4-777070) part of the volatility seen in the CEB’s 2025 financials reflects weaknesses in how the tariff methodology and internal accounting practices have been applied. 

The tariff framework is designed to be cost-reflective, with periodic claw backs that return excess revenue to consumers when actual costs fall below projections. 

But delays in filing tariff requests, political interventions in previous revisions and inconsistencies in recognising claw backs in the CEB’s books have distorted both the strong profits reported in 2024 and the losses recorded in early 2025.

Dr. Ralapanawe notes that the Bulk Supply Transaction Account was introduced to improve transparency in cash flows between generation, transmission and distribution, yet it was set up out of alignment with the tariff cycle. 

This created competing figures between the CEB, the regulator and the IMF over when automatic pricing adjustments should be triggered. These discrepancies have amplified concerns over the CEB’s short-term financial position despite the presence of a functioning cost-reflective framework.

He argues that the IMF’s recent emphasis on interim profit-and-loss outcomes overlooks the corrective nature of the tariff mechanism and its built-in adjustments for over- or under-recoveries. 

The more significant issues, he says, lie in governance, financial management and the accuracy of data provided to policymakers and lenders. 

Without improvements in these areas, Dr. Ralapanawe warns that the unbundling process and the move toward a more transparent, commercially operated power sector will continue to face setbacks regardless of tariff revisions or temporary shifts in generation costs.