GEC deal initialled-official takeover October 1
By Gitanjali Singh
After trying for four years to privatise the beleaguered Guyana Electricity Corporation (GEC), the government has finally clinched a deal with the Commonwealth Development Corporation (CDC)/ESBI consortium of the UK. Official takeover is set for October 1 by which time the management structure of the power company would be rejigged and at least eight new managers from the UK will be in place. By year end, a 14-man expatriate management team will be running the utility to ensure stability in power supply and increased generating capacity by executing a business plan which sees an expenditure of US$10M annually for the first five years. "All that remains after today's initialling of the agreements (reached) is the necessary filing of certain legal forms and the mobilisation of persons who will take over the management of the new company - Guyana Power & Light (GP&L)," government's key negotiator, Winston Brassington said yesterday. Prime Minister Sam Hinds, Andrew Aldridge, Manager of CDC's power operation (who was the chief negotiator on behalf of the consortium) and Brassington yesterday initialled the agreements in the Credential Rooms at the Office of the President, signalling an end to the negotiations. President Bharrat Jagdeo was on hand briefly to offer his congratulations and to express his satisfaction on the achievement of a deal. The government aggressively began pursuing privatisation of the power company in 1996 but its first potential investor, Sask Power Commercial, walked out when the two sides were on the verge of reaching agreements. The collapse of the deal was precipitated by the post-December 1997 election disturbances. After another round of tendering, the government began negotiations with CDC/ESBI in 1998 and had expected to close a deal by September of last year. However, agreement on tariff increases, which was a prerequisite to the deal, ran into difficulties with various sectors of society here and a consultative process began with these local partners. By this time, the Guyana dollar had depreciated substantially, changing the basic terms of the agreement. Almost two months ago, the government indicated at a public forum with CDC/ESBI that major agreements had been reached on the shareholders agreement, the share subscription agreement, the management agreement and the operating and agency agreement. However, amendments to the Public Utilities Commission Act and the Electricity Sector Reform Act were needed to further the process and this ran into trouble with opposition parties here. The bills were eventually passed. "This (initialling today) is yet another milestone towards the completion of the capitalisation of the GEC. Today's occasion represents the completion of negotiations for this transaction," Brassington told reporters at the initialling ceremony. All the schedules necessary to the agreements and other legal documents necessary have been completed. The government now has to lodge the vesting order which effects the transfer of GEC assets to the Guyana Power and Light Inc. Also to be transferred to the new company will be the employees and certain management staff, along with $5B in liabilities including that for the Wartsila power plants. GEC has a liability of $14B but only $5B of this is being transferred to GP&L and of this, US$12M is to be collected on behalf of the government. Most of the debt not transferrable to the new entity represents accumulated losses accrued by GEC over the years. Official signing of the deal will take place on October 1, when management and financial responsibility for the utility will come under the purview of CDC/ESBI. The consortium will receive its 50% equity subscription in a phased manner for which it is paying US$23.45M but which is also being phased in over three years. "We have all worked incredibly hard to deal with all the various aspects of this transaction. We are very pleased that we have reached this milestone and we see a very positive future for the consortium working in partnership with the government to take the business of GEC forward into the next century," Aldridge also told reporters. He said the first members of the pre-mobilisation team for the official handover of the operations will be here in a matter of weeks, bringing with them international experience. Aldridge is confident that the new management can develop the business to provide a reliable source of power which will help to stimulate economic growth in Guyana. He expressed gratitude for the assistance of the President and Prime Minister in sealing the deal. And Hinds noted that the government's search for a 50-50 joint venture partner is now at an end. "I look forward to getting the CDC/ESBI team on the ground here so we can get on with the job of improving our electricity sector," Hinds stated. Hinds was not in a position to say how many of the current managers would no longer be required in the new structure but John Lynn, ESBI's manager, utility investments, said the management team will hold the senior positions. Lynn told reporters that the new managers will move to bring back at least 10 to 12 megawatts of generating capacity to the system in the first year by rehabilitating existing units. "We know customers in Berbice and Versailles suffered outages recently because of relatively short generation capacity..." Lynn said. Other priorities of the investor will be improving the transmission and distribution system to slash line losses and to improve on billing and collection to wipe out commercial losses. Lynn said it will take some time for the improvements to become effective but said the emphasis will begin early and efforts will also be made to train staff at GEC.
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