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by Ravi Ladduwahetty

The Asian Development Bank has arranged a loan package of US$ 130 million (Rs. 13 billion) for the debt-ridden Ceylon Electricity Board which is scheduled to go for approval before the Board of Directors in Manila on October 18.

Of the US$ 130 million loan package, US$ 60 million (around Rs. 6 billion) will be for the reforms and the restructuring while the remaining US$ 70 million will go for the rural electrification program, ADB's Country Director in Sri Lanka John Cooney told the Daily News in an interview yesterday.

The US$ 70 million loan package, on concessionary terms, will be on repayment, spread over thirty-two years with a grace period of eight years. The interest rate will be 1 percent per annum during the grace period and 1.5 percent during the repayment period.

The US$ 60 million component will be from a Capital Resources Act and will be linked with the London Interbank Borrowing Rate (LIBOR). The US$ 60 million loan will be released in two tranches.

The CEB is in a financial quagmire with debts spiralling up to Rs. 18 billion. The restructuring program will also entail the expenditure of the Rs. 6 billion in sweeping reforms which include the setting up of independent companies for generating, transmission and distribution, ADB's Deputy Country Director in Sri Lanka Joseph Zveglich said.

A three-member team from Manila is also due in Colombo shortly of which one is a technical consultant who will introduce the technicalities in the restructuring.

The US$ 60 million loan package which will go in for the unbundling of the CEB from its present morass, will also see the formation of a separate company for the generation of thermal and hydro power which will operate as one company initially.

There will also be a single company for transmission and four companies for distribution, Zveglich said.

These companies which will be run as separate commercial entities will remain as Government owned, will have to continue its financial and technical operations in accordance with other companies as in the Companies Act and they will also have independent private sector auditors, he said.

He said that the Rs. 6 billion restructuring program will also set off some of the losses of the CEB due to operational synergies which have been mapped out. These companies will also be designated regionally according to their geographical locations such as Randenigala, and Laxapana and others which will run as autonomous corporate bodies.

The Deputy Country Director also ruled out the possibility of these companies being subsequently listed on the Colombo Stock Exchange.

The second component of US$ 70 million (Rs. 7 billion) is for the establishment of an islandwide rural electrification program which will be made available for 620 rural electrification schemes and the funding will go in for the purchase of equipment for the transmission projects those are under way in implementation

A further factor which will augur well for the electricity industry in Sri Lanka will also benefit the consumer will be the formation of the Regulatory Body for the industry in the lines of the Telecommunications Regulatory Commission (TRC). The piece of legislation, named as the Public Utilities Commission Act, was approved in Parliament on Tuesday. This will give far-reaching powers to the Consumer. The Act will also specifically empower the companies to have complaints handling which will provide the additional leverage for the creation of a user-friendly system with special emphasis for complaints handling divisions as well

CEB's General Manager D.C. Wijeratne said that there will be eight companies which will be formed as a matter of priority following the CEB Reforms Bill being passed in Parliament yesterday.

The highlights of the Bill will entail the formation of these companies which are meant to be run as independent entities without Treasury funding.

They will enter into contracts with each other. The generating companies will contract with the transmission companies, who will enter into a contract with the distribution companies.

The Regulatory Commission will be empowered with far reaching powers which will give the consumers leverage for a better product and service, he said.

Wijeratne ruled out the possibility of a single employee being retrenched. He said that on the contrary, there will be additional employment opportunities with the setting up of these new companies

He said that the CEB has also installed over 100,000 electricity metres as a part of a program to install 357,000 electricity metres in order to combat the menace of tapping.

The collections are much more effective now and this has been an integral part of our improvements in servicing our staggering debts, he said.

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