New power company will invite local investment in 24 months
By Patrick Denny
The new Guyana Power and Light Inc (GPL) will within 24 months invite a number of local companies from a pre-approved list to invest in the electricity corporation. The investment placements will constitute up to five percent of the total shares of the company, which will at first be a 50/50 partnership between the government and CDC/ESBI. This was one of the issues discussed on Monday at a seminar organised by the Privatisation Unit to present the GEC reincarnation to the public. After five years the corporation will initiate a public offering for 20% of its shares leaving the government and investors with 40% each. First preference will go to employees of GPL who will be allowed to pay for their shares in instalments. Preference then follows to citizens of Guyana. Janice Brennan, legal adviser to the government, when questioned as to why there should not be an immediate initial public offering (IPO) said that it might be offered before five years but that the company must first overcome inefficiencies and achieve a good track record to present to potential investors. She warned that a failed IPO could be disastrous for a country's economic credibility as it sends a signal that not even its citizens have a belief in a major utility's viability. It was also reiterated that because of the sharp devaluation of the Guyana dollar late last year during the negotiations with CDC/ESBI the government had assigned all dividends to the investor for the first five years of operations as the devaluation was said to have shot a big hole in the financial assumptions for the new corporation. CDC/ESBI will be spending US$23.5 million for 50% of GEC that for a number of years has not provided reliable service and has made substantial losses including $539 million for the six months to June of this year. There will be five directors on the governing board of the company. Two from the government side and two from the investor. The fifth member will be chosen by the government from a list of two approved by the investor. Major decisions such as approval of annual and five-year budgets will require a two thirds majority. Brennan observed that this will allow the government to be involved in shaping the long-term vision for the company, while leaving month-to-month operations to GPL management. Shortly before the incarnation of GPL, the old GEC will be converted into a company. This is necessary because of agreements between the governments of Guyana and Japan which stipulate that the generators that GEC received under the grant aid programme cannot be sold to a private investor. The new GEC, as basically a paper company, will retain ownership of these plants and lease them to GPL. All maintenance and spare parts costs will be borne by GPL. Hans Barrow, honorary consul to the Government of Japan expressed reservations at such an arrangement as it essentially allowed a private corporation to profit from a gift from the Japanese people. He described the arrangement as lacking in sensitivity and questioned whether this would have a bearing on future relationships as regards grant aid. Johan Van't Hof, partner at Price Waterhouse Cooper, who advised the government on the agreement, admitted that this manoeuvre was a little like "window dressing" but mentioned that talks had been held at diplomatic levels. Prime Minister Samuel Hinds, who chaired the proceedings, proposed that revenue from the leasing of the turbines which will be approximately one US cent per kilowatt hour will be used to fund rural electrification programmes that require the government to source 75% of the infrastructure costs.
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