COLOMBO: Sri Lanka's state-run oil firm will break even this year after years of losses despite losing a hedging case, officials said on Monday, citing a cut in subsidies for power generation and the government raising electricity tariffs for the turnaround.
Ceylon Petroleum Corporation (CPC) recorded an operational loss of 89.7 billion rupees ($685.65 million) last year, and a 94.5 billion rupee loss in the previous year.
Central bank data showed it has suffered operational losses from 2008. "We will see a break-even this year even after the payment of $60 million on a hedging deal," Oil Minister Anura Priyadharshana Yapa told reporters in Colombo.
CPC lost a $60 million hedging case against Deutsche Bank in November last year after a US-based arbitrator ruled in favour of the bank.
Susantha Silva, CPC managing director said raising prices early this year and a reduction in the subsidies on furnace oil supplied to the state-run electricity firm had helped to improve its financial position.
Sri Lanka, which has long subsidised fuel due to political concerns, raised the price of fuels to record levels in February to prevent the CPC suffering further losses as its oil firm could not import Iranian crude due to the US sanctions.
The frequent closure of the island nation's only state-run 50,000 barrel-per-day crude refinery and reduced output after the sanctions were imposed forced Sri Lanka to import more refined products.
Sri Lanka's refinery is built to handle predominantly Iran crude. Since the sanctions, the CPC has been importing crude from Oman and Abu Dhabi, but the output has been far less than using Iranian crude, officials have said.
Sri Lanka raised the electricity tariff from May under reforms to reduce losses in state-run power firms, after repeated requests from the International Monetary Fund.
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