Hinds' GPL funding proposal gets mixed reviews
Stabroek News
March 2, 2003
The Prime Minister's call for Guyanese to invest in the cash-strapped Guyana Power and Light (GPL) is provoking mixed reactions. PNCR parliamentarian Winston Murray says the Prime Minister's proposal is an indication that the Government went into an alliance with a partner that lacked the capacity to provide the investment for GPL or access the funds required, which was a primary motivating factor for privatising the company.
President of the Guyana Trades Union Congress (TUC) Carvil Duncan supports the proposal in principle but said that the Prime Minister would need to provide more detailed information about the company to allow for informed decisions to be made.
Prime Minister Sam Hinds first floated the proposal at a press conference following the debate in the National Assembly that Guyanese individually and through their financial institutions should invest in GPL as such investment was necessary for the development of the country.
Since then he has circulated to a number of companies some information about the conditions under which the investment would be made.
According to the information the Prime Minister has circulated, the investment could in the first place be a loan, which could be converted into equity within a five-year period. He wants the Guyanese syndicate to invest US$10m in the first year and a further US$20m during the next four years.
The rate of interest that would be paid on the loan is the Treasury Bill Rate plus 3 per cent. The Prime Minister adds that the syndicate would be offered two seats on the GPL board, which would be enlarged to seven members and those two seats could be made available with the first US$7.7M of the loan converted into equity. It is not clear how this would square with new legislation which requires all companies wishing to issue shares to be registered with the Guyana Securities Council.
In an invited comment to Stabroek News, Murray said that he had several difficulties with the proposal.
Firstly he believes that it is the company rather than the Prime Minister, which should be making the approach to local investors. The government's role he said should be to support the company's approach.
He has a problem too with the manner in which the approach is being made describing it as being due to a lack of appreciation for how these things are done. He said that no decent company would entertain a proposal being made in such an informal manner with no information as to who should be contacted to obtain any further information that may be required.
Murray's second difficulty is that he does not believe that the investment is an appropriate use of the pension funds held by the insurance companies. He explained that it is his opinion that those funds should be for the use of Guyanese to invest in the expansion of Guyanese industries.
In his comment to the Stabroek News Duncan said that he had always held the view that the Guyanese people should own the power company as "we have the capacity to run the company efficiently and effectively."
However, Duncan said the Prime Minister would need to go much further than he has done by providing a prospectus, which would include GPL's track record and its projections for the future. That he said was information which was needed before any serious consideration could be given to the Prime Minister's proposal.
The Guyana Government and its 50 per cent partner in GPL, AC Power is locked in negotiations over a new management contract since the present arrangements have not resulted in the expected reduction in commercial and technical losses in accordance with the agreed time-table. Instead of being reduced to 24 per cent the commercial and technical losses have ballooned to 44 per cent and the GPL is using this and the increases in fuel prices to hike its rates.
A number of civil society organisations including the political parties and the Consumers Association have come out against the proposed hike and a private citizen Ramon Gaskin has obtained a court order which prohibits the company from implementing the new tariffs. The tariffs should have come into force on February 1.
