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By Ravi Ladduwahetty

The Ceylon Petroleum Corporation (CPC) has set up an all-time record of Rs.105 billion in turnover up from Rs. 95 billion last year and Rs. 26 billion in taxes for the year ended December 31, 2002, making it the first instance where a corporate/state entity has surpassed the Rs. 100 billion turnover mark and also the highest ever payment in taxes to the state coffers by any pubic/private sector organisation according to the CPC Annual Report which was released last week.

The Corporation has also reported a profit of Rs. 8.5 billion for the period under review, the highest todate, which has all gone in for the settlement of the debt, which at the commencement of 2001 was a staggering Rs. 23 billion.

CPC Chairman Daham Wimalasena, in an interview with the Daily News yesterday, attributed the phenomenal success of the Corporation's financial performance to the peace dividends and the dramatic reduction in financial overheads and bank charges during the period under review.

The main reason for the drastic reduction in the financial overheads is the Government's decision to allow the Corporation to approach private sector banks which provided very competitive interest rates vis-a-vis the State banks, he said. This is indeed remarkable as over 75 percent of the Corporation's borrowings have been from the State banks and the private sector banks cannot cope with the funding requirements of the CPC, he said.

He said that the success of the CPC has also got to be considered in the wake of the crude oil prices in the international market rising by over 50 per cent, but the Corporation has increased prices only by 20 per cent.

Responding to a question as to why the profit of Rs. 8.5 billion was not used to reduce petroleum prices, the CPC Chief said that the profit was used to pay the debt to curb rising borrowing costs and also to cushion the rising international prices.

The value of CPC stocks have risen by US$ 45 million between January 2002 and March 2003 and the borrowing costs would have been higher if not for the fact that the entire profit of Rs. 8.5 billion was not ploughed back to settle the debts, he said.

The Corporation's credit limit to the Sri Lanka Railways, the Armed Forces and the state institutions at any given time was in the region of Rs. 3 billion and we hope to reduce this limit to Rs. 1 billion this year he said. We will not cut the supplies, but they will be compelled to pay more cash for their purchases in the future, he said.

The CPC is now not dependent on Treasury Guarantees to borrow funds for working capital requirements, which has risen in recent months due to higher international prices, but bank loans are provided on the strength of its own operating cashflows and the interest rates which are provided are as competitive as for any top blue chip corporate, Wimalasena said.

Banking analysts point out that the rates have declined from LIBOR plus 2.5 per cent to LIBOR plus 1 per cent.

CPC joint venture with Laugfs Gas

The CPC plans to enter the gas market as a joint venture with Laugfs Gas, which would be within the next six to twelve months, Wimalasena said. The advantage of the joint venture is that the CPC will be able to make use of the Laugfs Gas infrastructure.

We have no filling plant, cylinders, special bowsers and transport infrastructure from the refinery to the plant, he said. "We are actively looking into the business and we are awaiting Cabinet approval for the venture", he said.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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