Gaskin proposes people’s buy out of power company
Stabroek News
March 3, 2003
Guyanese should not be asked to invest nor allow their pensions funds to be invested in loans to Guyana Power and Light (GPL) under the present management but rather should be encouraged to invest in buying out the government’s partner, AC Power.
This is the view of consumer activist Ramon Gaskin, who in January successfully moved the Court to place a temporary block on increases in electricity tariffs. The case comes up for hearing on March 10.
Gaskin says Guyanese should be urged to buy out AC Power, reconfigure the US$27M allocated for the Unserved Areas Electricity Project so that US$7 million could be invested in reducing the transmission and distribution losses, which would improve GPL’s financial performance. As a result of the improvement in its financial performance the Guyanese-owned GPL could then return the US$7M to the Unserved Areas Project.
Prime Minister Sam Hinds had recently urged individuals and local financial institutions to invest in the cash-strapped GPL. But Gaskin contended that by its own admission, AC Power says GPL is not a good investment.
He pointed out that GPL’s losses last year were $500M and that does not include the $864M in dividends not paid on preferred shares. Also he said that the company has bad debts totalling $$1.1B, which is an indication of poor management of its customer accounts. He pointed that the management agreement’s Year 3 target requires bad debts to be no more than $600M on a revenue base of $12B.
Gaskin also contended that the commercial and technical losses, which had ballooned to 44% when the Year 3 target was set at 24%, meant that GPL incurred more than $2B in wasted production.
Gaskin said for GPL to be attractive to investors it needed to put its technical and financial house in order, contending that if it had met its targets for last year, the company would have shown a profit of $2.7B.
He says that investment in utility companies is not a bad investment as they are often monopolies and people invest in them in the United Kingdom and United States of America.
His buy-out proposal would put the utility in the hands of the Guyanese people and would call for the Government giving up its 50% stake as well. Gaskin said GPL has 120,000 customers and each residential consumer should be asked to pay an additional sum on their monthly bills for this purpose over a three-year period. For residential customers the sum could be set at $800 a month and at $5,000 for commercial concerns. He said that sufficient money could be raised to buy out AC Power’s 50% holding, pointing out that AC Power paid for its holding over three years.
He added that under Guyanese ownership and control, new managers at far less than the US$3.6M paid to AC Power in management fees could be recruited. In his calculations some US$3M could be saved under the present arrangement of US$2.5M that AC Power is proposing for the new management contract.
He argued that under Guyanese ownership and management, the $700 million in management fees would be eliminated, bad debts would be reduced, there would be a positive impact on the stealing of electricity and the present tariff would be frozen for the next three year.
Also he said because they would now have a stake in GPL, many of the companies turning to self-generation would return to the grid because the costs would be cheaper and the possibility of rolling back tariffs could be explored.
He said that lending money to GPL under its present management would not be a good idea as its management would be in the hands of AC Power as well as control of the board which would raise problems of accountability and transparency.
