INTRODUCTION

Formation

Lanka Electricity Co. (Pvt) Ltd. (LECO) is a private limited liability Company registered
under the Companies Act No.17 of Sri Lanka for Distribution of Electricity.

Ceylon Electricity Board (CEB) and several Local Authorities were engaged in distribution of
electricity in the Island, prior to the formation of LECO. Local Authorities purchased power
from Ceylon Electricity Board and distributed within their franchise area. The services
provided to customers by the Local Authorities were of very low standard. Electricity losses
in the Local Authority distribution systems were very high, while the reliability of supply was
very low. Due to insufficient system capacities new customers had to wait long periods to
obtain supply.

In 1982 the Government of Sri Lanka appointed a committee to study and report on the
"Improvement of Electricity Distribution in Local Authority Areas". The committee, having
studied several options to overcome the problem discussed above, recommended that
formation of an Electricity Distribution Company with Ceylon Electricity Board participation
be the best solution.

Government accepted the proposal, and LECO was incorporated on the 19th September,
1983. Present shareholders of LECO are Ceylon Electricity Board, Urban Development
Authority, Government Treasury and four Local Authorities (LA).LECO operates under the
direct supervision of the Ministry of Power and Energy of Sri Lanka.

ADB funding and the projects in acquisition of area

The unique achievement of LECO as a successful business venture was its ability in meeting
a challenge in attracting foreign funding for the network improvements. LECO with the
financial assistance pledge by Asian Development Bank converted a technically run down
network asset to an efficient and profit making network within a short period.

LECO carried out three projects with ADB in acquiring and modernising their network in
1985, 1987 and 1995. Total ADB funding attracted by the company for these three projects
was USD 57.7 million. LECO management was structured by BECA WORLEY of New
Zealand under these project financing.

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 INTRODUCTION

In year 2007 LECO made another proposal to Asian Development Bank for the capacity
expansion through their clean energy and access improvement project. This proposal was
accepted and the finance of approximately USD 19 million is pledged for the construction of
five primary substations in LECO area for capacity expansion. This project is due to
commence on June 2009 and to complete on March 2011.

LECO by the end of the year 2008 served 458,492 customers. Electricity sales in 2007 have
grown to 1,099 GWh, with the assets worth over 9.5 billion bringing a total revenue of
Rs. 11,395 million. This is an increase of 5% of the energy sales and 19% of revenue
compared to year 2006. The overall system losses of 4.8% recorded in 2008 is a noteworthy
achievement.

Reliability of the distribution system has been vastly improved. LECOs staffs have strived
hard to offer reliable and efficient services through a value added process to our customers.
Improving quality of service delivery has been the key business promotional activity adopted
by the top management so as to remain as the leader in the industry.

LECO continues to grow in their business while getting efficient and effective. Our total
number of customers has grown from 187,000 to 460,000 over a period of 16 years while
consumers per employee have increased from 150 to 336. The total losses have reduced
from 10% to 4.8%. System average interruption duration index (SAIDI) has reduced to 265
to 54 during this period as shown in the table below.

1992 1996 2000 2004 2008

Average Duration of power 265.78 598.06 77.23 65.64 54.08
interruptions of the network
Annual Loss % 10.06 10.09 8.68 5.61 4.8
Workforce 1,255 1,287 1,329 1,302 1,363
Total Consumers 187,724.3 255,417 329,089 392,792 458,492
Consumers per employee 149.58 198.45 247.62 301.68 336.38

Table 1: LECO statistics

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 INTRODUCTION

Power Sector Regulation

Sri Lankan Power Sector is migrating from the monopolistic state to a regulated power
system with the new power sector legislation. LECO is one of the key motivating agencies
of this novel development and is a prime contributor to the regulation.

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 NETWORK

LECO network is predominantly aerial with scattered underground cable feeders. The
electricity transfer voltage from CEB to LECO network is 11kV. Twenty Nine 33/11kV
primary substations of 10MVA and 20MVA capacities supply power to the LECO network.
LECO network comprises of 1,017km of 11kV network, 3,065 km of 400V network and
6,184 distribution substations supplying electricity to 460,000 customers.

The twenty nine 33/11kV primary substations serving the LECO network are of 2x5MVA or
2x10MVA capacities located in load centres. These substations generally feed an area of 25
to 50 square kilometers depending on the load density. The LECO 11kV network is three
phase three wire system. The network is designed as interconnected set of radial feeders
from the twenty nine primary substations. This scheme provides alternative supply to each
node of the network. The sectionalized switching regimes at feeders are configured for
rapid fault location and isolation. The 11kV feeders are routed mostly along road corridors
and other such access routes. The automatic re-closing and feeder sectionalizing protection
regimes implemented on these feeders are designed to improve supply reliability. The three
phase four wire low voltage system comprises of approximately 150-200A rated feeder
circuits with 15A, 30A and 60A service connections.

Basic feeder protection schemes are provided at the primary substation feeder bays. The
distribution feeder protection is by auto-reclosing switchgear in coordination with the
sectionaliser switches.

The installed distribution transformers are three phase 11kV/415V double wound, Dy11
hermetically sealed or conservator type. The capacities are 50kVA, 100kVA, 160kVA,
250kVA, 400kVA and 630kVA. The 11kV feeders are aerial or XLPE insulated Aluminium
cables of 185mm2 to 60mm2 sections.

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 NETWORK

The 11kV feeders across all LECO administration boundaries are metered using
import/export energy meters. Therefore the network control centre can calculate energy
losses for each customer service centre area and initiate prompt action in loss controls.
Further, all the LV feeders at distribution substations are metered to reconcile energy sales
at each distribution substation. These two monitoring and metering regimes provided
strong control over the network losses. Further, all customer energy meters are subjected
to close scrutiny with the bulk meter calibration period of one year.

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 MANAGEMENT STRUCTURE
[Pick the date]

LECO franchised area and the customer base is divided in to seven branches and further to
25 Customer Service Centres for efficient and effective service. All the branches are
independent bodies centrally controlled by the corporate management of LECO.

Figure 1: LECO Management Structure

The LECO management is handled by four divisions under the supervision of the General
Manager, who is the chief executive officer of the company. The four divisions are managed
under the supervision of four divisional managers. The four divisions, namely Operations,
Engineering, Finance and Administration exercise parallel control over the LECO branch
structure. The operations division is mainly responsible for carrying out day to day
distribution system operations such as controlling, upgrading and consumer relations in its
network. Engineering division is responsible for planning, designing of distribution system,
carrying out special projects, procurement of goods and training of LECO staff. The
Finance division is responsible for all financial controls, management accounting and the
treasury management of LECO. The Human Resources and Administration division carries
out the administration and the personnel management function of LECO.

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 MANAGEMENT STRUCTURE
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Branch administration is carried out by a Branch Manager. Branch Manager is the regional
LECO corporate management representative. Each branch is an autonomous entity
administratively reporting to the Operations Manager and to other Divisional Managers
functionally. A branch independently carry out their financial and energy accounting systems
and are responsible for the technical and economical operations of their regional grids.

Branch headed by a Branch Manager is assisted by a Branch Engineer, Branch Accountant

and Administrative Officer. Branch Engineer is responsible for the network operations and
customer services while the Branch Construction and Planning engineer is responsible for
the asset management function. The Branch Accountant is responsible for the financial
accounting and the Branch Administration Officer is handling the administration of the
branch.

Each branch network and the customer base is further divided into Customer Service
Centres (CSS) which act as the peripheral representation of the branch. It has the
workforce to carryout system operations and maintenance in association with the
Distribution Control Centre and Branch Engineer. Typical CSC has a network with
approximately 20,000 connected consumers. CSC is headed by a Superintendent and
assisted by technical staff and responsible for 24 hours network operations.

The Engineering Division is sub divided into three sections, Training, System Development
and Information Technology. The Training section is responsible for the LECO internal and
external training programs and the System Development Division is responsible for network
planning, network development, engineering procurement and load study functions. The
Information Technology section is responsible for the entire LECO IT system comprising of
Enterprise Resource Planning System (ERP), Billing System, Geographic Information System,
Distribution Management System and the General IT functions.

The Finance Division is sub divided into three sections Financial Accounting section,
Management Accounting section and the Treasury Management section. The Financial
Accounting Section is responsible for the basic financial accounting functions including
invoicing, bill collections, energy purchases and internal fiscal controls. The Management
Accounting section is responsible for the management monitoring management information

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 MANAGEMENT STRUCTURE
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system and the corporate auditing. The LECO treasury makes short term investments, and
other treasury functions.

The Administration Division is sub divided into two sections, Human Resource Management
section carries out personnel recruitments, promotions and the HR management, and the
Administration section carries out the basic administrative functions of the company.

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 OUR CUSTOMERS

LECO purchases electricity form CEB at 29 primary substations at 11kV voltage and
distribute to nearly 460,000 customer base with approximately 87% domestic
customers. Our services to the 460,000, Domestic, Religious, General Purpose,
Hotel and Industrial Customers with a reliable and high quality power is highly
benchmarked nationally and internationally. We experience a growth of
approximately 4% customer base every year.

500000

450000

400000

350000

300000 Religious
General Purpose
Temporary
250000
Industrial
Hotels
200000 Total

150000

100000

50000

0
2004 2005 2006 2007 2008

Graph 1: Growth of the Customer Base 2003 2009

The highest energy consumption of our network is also by the Domestic customers
which amount to 44% of our total energy sales as shown in the table below.

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 OUR CUSTOMERS

Customer Category Average Consumption Percentage from

(kWh) the total
Domestic 469326 43.97%
Religious 7067 0.6%
General Purpose 278035 26.05%
Industrial 242824 22.75%
Hotels 42420 3.97%
Street Lighting 25595 2.3%

Table 2: Customer Average Consumption 2008

The total revenue of our company is approximately USD 120 million. Our network
cumulative consumption is as shown in figure 1, indicating that 50% of the customers
consume below 150kWh per month, 10% consumes below 600kWh per month and
90% below 100kWh. The network load experience a day peak of approximately
280MW and a night peak of approximately 300MW.

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 ASSETS AND WORKFORCE

2007 2006 2005 2004 2003

Non Current Assets Rs. 9,536 6,336 5,926 5,625 5,535
million
Return on Ave. Net Fixed 11.38 9.38 9.00 6.20 3.70
Assets
Current Ratio 1.85 2.49 2.7 2.6 2.7

Long term Debt to Equity 0.13 0.11 0.19 0.23 0.27

Table 3: LECO Assets
1. More than 95% of non-current assets comprised of infrastructure and it has reached 9
billion rupees mark in 2007 compared to 6 billion rupees in 2006.
2. Further return on fixed assets ratio has grown from 3.7%to 11.3% from 2003to 2007
which depicts our developments in nature of efficiency and productivity.
3. We have been maintaining a good working capital ratio over the years.( 1.85 in 2007)

Equipment
LECO equipment asset is primary for our high level operational standards maintained over
the last twenty five years. The specialized equipment procured over the long held trade
relationships with the equipment manufacturers and the knowledgebase LECO owns in
identification and selection of equipment resulted in our present equipment asset. We own
hydraulic heavy equipment to thermal imaging cameras and automated energy meter test
benches to GIS equipment in our equipment stores ideal of each and every specialized
distribution network operational function.
The load testing, inspection and the calibration of these equipments are directly supervised
by a specialized section of the company functioning under the Engineering division.
Each consumer service centres is allocated with the Breakdown services fully equipped with
a set of equipment such as fleet of vehicles fitted with radio communication equipment,
hydraulic platform trucks, and digger cranes and other associated heavy duty equipment.
More specialized equipment such as thermal imaging cameras, energy meter test benches
and GIS equipment are either centrally located at the LECO test laboratory or with the
branch equipment store for the access of Customer Service Centres and branches.

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 ASSETS AND WORKFORCE

Expertise
LECO as an actively involved technical entity of the utility business over a period of twenty
five years has acquired a well skilled and qualified professional and operational staff. LECO
with its technical reputation and the financial stability over two decades of history has been
able to recruit the best skills of the country. The extensive internal and foreign training
programs active during this period has further qualified this work force to a highly educated
and skilled team geared for their trade.

Workforce and Management staff qualifications

The LECOs belief of high quality workforce is reflected by the workforce it employs today.
The management staffs above branch managers level are all with post graduate
qualifications. Senior management is mostly with PhDs. All the engineers are graduates and
all engineers above branch engineers level are professionally qualified. All the technical staff
is at least with three years national vocational qualification level 5 or above as shown in
table below.

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 ASSETS AND WORKFORCE

Staff qualification schedule

Designation Experience Eligibility Qualifications

Minimum of 10 years B.Sc. Degree in Engineering or
Senior Mangers experience National diploma level 7 or
above
Consumer Minimum of 5 years National diploma level 6 or
Service experience above
Superintendents
Minimum of 3 years National diploma level 5 or
Technicians
experience above

Table 4: LECO Workforce Qualifications

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 CUSTOMER SERVICES

As it is with any distribution company, Lanka Electricity Companys major

performance is through the customer satisfaction. Lanka Electricity Company
believes that our prime objective is customer satisfaction through reliable and high
quality power supply. Further we pledge our customers for 5 service guarantees.
We ensure our customers of 14 day connection period, energy meter or pole
shifting period of 14 days, assurance of voltage within 6% regulation, testing and
calibration period of 14 days, breakdown service period of 30 minutes in average and
guaranteed responsibility of the customer equipment due to network faults. The
network operations and customer services system are designed with the intention of
achieving these five service pledges. Therefore our network area is sub-divided into
seven branches each having approximately 70,000 customer base. A Branch area is
subdivided into three or four Customer Service Centres with an approximately
20,000 customers for each centre. Each customer service centre is equipped with 24
hour maintenance team with the required equipment and facilities to attend any
breakdown call within 20 to 30 minutes of time. The customer service centres are
located in such a manner that the breakdown maintenance teams can attend any fault
within the stipulated time period in their designated area. Breakdown maintenance
operation is centrally monitored though our control centre where from the moment
of customer complain up to the time of rectification, consistent monitoring is
exercised though our radio communication network. LECO owns a radio
communication network in this regard which connects the entire LECO area to the
centralized Control Centre.

The new connection for a customer is ensured to be given within 14 days provided
that the tentative customer pays the new connection fee timely. The new
connection estimates are done by the Job Costing System available with our
Enterprise Resource Management System where directly all the resources required
for the new connection is allocated at the point of estimate. Our fully trained
technical officers either use our Geo-Information System supported with aerial
photographic database or visit the location as it may be appropriate to extract the
location specific information and enters the new connection details to the system.
With the payment by the customer automatic job order is initiated and the service
connection is given at the next available work allocation.

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 CUSTOMER SERVICES

The customer complain attendance system with LECO is also supported by our
Enterprise Resource Management System where a customer complain is logged and
tracked consistently till the service is provided. Each of such complain is allocated
with a call number and customer and the management can track the status of the
services at any time with reference to this call number.

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 BILLING

LECO is the first utility in Sri Lanka to introduce spot billing to customers at the very
inception in 1984. Billing system was computerized with the introduction of spot billing.
Billing errors are kept at a minim levels by constantly monitoring Billing Officers
performance. Their remuneration was coupled to performance and billing errors which are
tracked at the data entry to the computer system.

The Billing system is capable in handling existing customer base and it consists of Billing
management, Debtor Management and Billing Administration modules to facilitate easy
access, management and monitoring of revenue related activities to improve the efficiency in
revenue collection process which evidence the improvement of debt to sales ratio over the
period.

Private Bill Payment Collection agents were introduced in addition to the Banks at the early
stages. This has been welcome by customers as they were able to pay after normal working
hours.

Now various modes of payment facilities such as internet payment, credit card payments,
and automatic bill payment schemes are available to customers.

Further LECO is eagerly looking forward to launch Electronic spot billing and also prepaid
systems.

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 ENTERPRISE RESOURCES PLANNING

LECO uses an ERP system which is fully integrated linking the major functions and
processors of the company, thus enabling fully automated management system. The system
generates important management and function reports.
This integrates the total LECO accounting system, stores management, job costing,
customer services and human resources information to a unified database enabling the total
resource planning and deployment centrally. The below table explains the functions of our
ERP system.

Handles each and every transaction and extract various information

General Ledger such as account histories, audit trailing, transaction details and
management reports.
Fully integrated with financial system and includes sales, purchasing,
Sales & Inventory and distribution stock and warehouse management. Can track stock
movement and purchase orders.
Controls the acquisition, disposal, transfer, valuation and depreciation
Fixed Asset
of fixed assets.
Fully tracking of stock items from the time they are received until the
Warehousing
dispatch.
New connection service invoicing and monitoring the progress of the
Services
service.
Tracks a job from initiation to completion and allow to accurately
Job Costing
controlling elements of the costing procedure.
Human Fully integrated with financial system and maintains the payroll of
Resources each employee.

Table 5: Functions of ERP system

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 GEOGRAPHICAL INFORMATION SYSTEM

Geographical Information System

Identifying the wealth of having better asset database to leverage more advanced
geographically diverse asset management system which results efficient and effective
distribution network, LECO has deployed its own team to develop tailor-made
Geographical information system (GIS).
Today LECO is proud of having comprehensively updated GIS mapping system of half meter
accuracy for entire franchise area that lead to betterment of customer services,
productivity, workflow and investment planning.

Distribution Monitoring System

From the very inception LECO has taken steps to have a proper information system and to
analyze its information with a view to providing more efficient and effective service to the
customer and improving the related internal procedures in house.
The Distribution Monitoring System is designed to store information that is useful to carry
out the operational activities relating to the total distribution network of LECO. The
system stores information relating to the distribution network captures electricity
consumption & system interruptions and provides System losses, System reliability indices
and information relating to the distribution network as a part of Management Information
System (MIS) to foreseen the weaknesses and threats to gear the company on right
direction.

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 DISTRIBUTION CONTROL CENTRE

Distribution Control Centre (DCC) of the LECO plays an important role to

maintain continuous and reliable power supply through out and hence to build a
good image about the LECO among its customers. Under this purview DCC
constantly monitors or controls the performance of the entire distribution system
and also the activities of the operational staff involve in operation and maintenance
of the LECO distribution network.

To achieve this objective the functions of the DCC has been listed as follows.

9 Direct instructions to the field staff for switching operations

9 Alternate supply arrangements for customers during supply outage
9 Scheduling of power supply interruptions for routine maintenance work or
Construction
9 Inform the ordinary customers about the planned power interruptions
through media and the Bulk Supply customers individually
9 Issuing the work permit of permit to work for the field staff after isolation
of High Voltage lines and related terminal equipment and also reversal of the
operation after completion of work and cancel the work permit
9 Procurement of new equipment to the LECO distribution system
9 Monitoring and analysis of the power failures and provide instructions to the
field staff/power dispatcher to restore power supply without delay
9 Preparation of daily and monthly outage reports and there in
recommendations for remedial measures are forwarded to the higher
management

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 TECHNICAL TRAINING CENTER

The Lanka Electricity Company (Pvt.) Limited (LECO) has established a well
equipped Technical Training Centre (TTC) with ample land space for conducting field
practices of the trainees at No. 10, 4th Lane, St. Anthonys Mawatha, Kanuwana, Ja-Ela.
The prime objective of establishing a dedicated training centre for LECO is due to
the fact that LECO being the Electricity Distribution Utility has recognized and
realized the importance of constant training of its employees to accomplish their
duties as customer oriented satisfactory services to its clientele.

This training centre has two air conditioned lecture theatres to conduct interactive
class room sessions, discussions or presentations to the participants/trainees; one
computer laboratory and a workshop comprising of various types of tools used by
any Electricity Distribution Industry either for demonstration purposes or for getting
familiarized with or to develop the psychomotor skills of the trainees for effective
application and utilization of such tools in electrical distribution industry.

This TTC is now administered and managed by a Training Manager who holds senior
position in the LECO management structure. The Training Manager is responsible for
the administrative matters connected to the training centre where as the Training
Consultant is involved in organizing the training programs to cater the current needs
of the LECO and a constant revision of the curriculum of the training modules that
are being presently conducted at TTC to be in par with the development trend of the
technology and also with the newly evolved trends in management and
administration fields.

This training centre is not limited to the in-house training of the LECO employees
alone, but its capacity has been extended to the national level by conducting various
courses to meet the demands of the school leavers to get them qualified and trained
in hands-on experience to get the them either self employed within the country or
get them employed in overseas as foreign exchange earners to this country. The
internationally recognized City & Guilds courses too are conducted by this institute
for enthusiastic employed personnel in various industries to get a National Vocational
Qualification/International Vocational Qualification for their career prospects. Further,
this is an opportunity for school leavers too, who are qualified with General
Certificate of Education in Advance Level and yet failed to seek University entrance

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 TECHNICAL TRAINING CENTER

for their tertiary level further education, as an alternate route to become them
technically qualified for their future prospects or to seek an employment opportunity.
This is a national level service rendered by LECO through the TTC for despairing
youths in this country to achieve their acceptance in their workplace or in the
society with recognized qualification as a measure of compensation to the lost
opportunities of the education in early stages of their life and hence to avoid
frustration among youths .

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 METER FACTORY

LECO owns the energy meter manufacturing facility in Sri Lanka serving the entire
energy meter requirement of the country. This is set up in technical venture with
Ante Metering Company of China. This factory is designed for 500,000 energy
meters production capacity per annum targeting the SAARC region markets as well.
This is considered one of the pioneering industries in Sri Lanka due to its high
technological nature and the importance of the energy meters to the electricity
utility operations. This factory has the capacity to manufacture electromechanical
and electronic meters of single phase or three phase. The capacity is further available
for special function meters such as prepaid meters, AMR meters and BPL meters.

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 BROADBAND OVER POWER LINE

Broadband over Power Line (BPL) is the technology by which the electricity power lines are
enabled with communication carrier for broadband communication. Lanka Electricity
Company pioneered this technology in South East Asian region by operating a successful
pilot project. In this project 188 households were serviced with average connection at 40
Mbps speed. LECO will shortly implement of this service in their network to provide
communication services to customers. This is planned to be provided as another value
added service to the LECO customers. Beyond offering consumers a potential new conduit
for accessing broadband at homes and businesses, LECO envisage a host of other useful
applications made possible by BPL such as fully functional SCADA system, automated meter
reading etc.

Broadband over Power Line (BPL) is developing as a viable third alternative to DSL and
cable modems to provide high-speed Internet access and offer Internet Service Providers
(ISPs) an alternative way into homes and businesses. BPL makes it possible for the
distribution of high-speed Internet service, by leveraging pre-existing electric distribution
systems which has grown for centuries to all parts of the country and thereby avoiding the
need to build a new infrastructure.

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 GENERATION

Kerawalapitiya 300MW, Combine Cycle Power Plant

LECO has invested in the largest power generation project of the country Kerawalapitiya
300MW combine cycle power plant. LECO owns 16% of shares in West Coast Power (Pvt)
Ltd, which owns Kerawalapitiya power plant, and LECO chairman is the chairman of this
generation company as well.

Net Metering

LECO has implemented a net metering project within their customer base to generate
renewable energy to the Sri Lankan system. LECO is in active dialogue with respective
parties in attracting carbon credit facility for the green energy project in the country.

Demand Side Management

LECO is in the process of setting up energy conservation zones within its franchised area.
Within these zones major energy conservation and demand side management is planned
with customer awareness programs, energy audits and street light efficiency improvement
projects.

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