This situation has arisen from the fact that GPL has been operating at a cash flow loss of US$0.6M per month from an income of US$4.9M per month and has accumulated debts totaling US$6.8M, threatening the purchase of sufficient fuel supply to maintain full generation.

While the failure of GPL to overcome commercial losses and to satisfactorily address the technical losses from transmission and distribution, have contributed to some 15% of the company’s operating costs, a completely unforeseeable rise in fuel prices, since 1999, of over 60% (see graphs) is the major contributing factor for the increased cost of generating electricity and the unavoidable impact on tariff rates.

It will be recalled that, on 1st October, 1999 the Government of Guyana (GOG) entered into an Agreement with Americas and Caribbean Power Ltd (AC Power) establishing Guyana Power and Light Inc. (GPL) in which the Government and AC Power each own 50% of the share holdings.

AC Power is 80% owned by the Commonwealth Development Corporation of the United Kingdom (CDC) and 20% by the Electricity Supply Board International (ESBI) of Ireland.

The Government has, entered into negotiations with AC Power for the immediate review of the Agreements with AC Power establishing GPL and GPL’s Licence to supply electricity for public purposes entered into on 1st October, 1999, for the replacement of the present Manager and for extending the capitalisation of the company.

The Government has also been in communication with the Government of the United Kingdom on the situation which has developed.

It is the Government’s intention to have this situation urgently resolved in order to avoid the real possibility of the country being exposed to a significantly reduced level of electricity supply.

In the meantime, the Government of Guyana, through the Office of the Prime Minister, is holding a series of meetings to brief and consult with major stakeholders on the electricity situation.

On its establishment, Guyana Power & Light Inc. entered into a Management Agreement with AC Power as the Managing Partner who subcontracted ESBI to provide the Senior Management team for an agreed Management Fee, the full details of which have been published.

The Management Agreement obligated AC Power (ESBI) for GPL to provide an efficient service at economic cost with clearly defined Operating Standards and Performance Targets, to implement the Development and Expansion Programmes incorporated in a Five Year Business Plan (1999-2003) and included an explicit provision for funding from Private Placements and debt financing to be raised by AC Power.

The Development and Expansion Programmes included the refurbishment of GPL’s Transmission & Distribution (T&D) facilities to be financed from funding to be raised by AC Power and the introduction of reliable billing collection services to substantially reduce commercial losses caused by the widespread theft of electricity and inefficient collection.

AC Power have failed to raise the required funding and have failed to introduce a reliable billing collection service, resulting in continuing and unacceptably high technical and commercial losses.

Technical and commercial losses when GPL was established, contributed to an estimated 36% of electricity output, as a consequence, these losses were being reflected in tariff rates. The company was expected to reduce these rates to 29% by 2001 and 24% by 2002. Instead, these losses have increased to over 40%.

Government from 2001, registered its concern that GPL was failing to meet its capital expenditure and investment targets and bring about the effective management of technical and commercial losses.

At the Annual General Meeting (AGM) of Shareholders on 27th November, 2001, and again at the AGM on 24th June, 2002, Government registered its concern that the cost of continuing technical and commercial losses were being passed on to consumers and urged a review of the Management Contract and of the Managers’ performance.

At the Annual General Meeting of Shareholders on 24th June, 2002, Government noted AC Power’s “ inability to raise matching funding to the approved European Investment Bank”, emphasised “the technical and commercial losses impact on the level of tariffs to consumers” and requested “a review of the Management Fee”.

The Share Subscription Agreement with AC Power required the provision of equity funding to an amount of US$23.45M paid as follows:

1. October 1999 - US$9M

2. October 2000 - US$6M

3. October 2001 - US$5M

4. October 2002 - US$3.45M
AC Power has, however, withheld the final payment of US$3.45M claiming that GPL has been denied its right to implement tariff rates as a result of the Public Utilities Commission (PUC) Orders of 2001 and 2002 preventing the effective implementation of new tariff rates. This matter is in dispute and, in accord with the Share Subscription Agreement between Government, AC Power and GPL, is now before a Panel process for determination.