GPL negotiations
Investor prepared to go in return for last tranche
By Gitanjali Singh
Stabroek News
March 6, 2003
AC Power has offered to walk from the Guyana Power and Light (GPL) deal at no cost to the government other than the outstanding US$3.45M purchase price.
A senior source in AC Power yesterday told Stabroek News that this position was put to the government by CDC Globeleq during the recent negotiations and was still open to the government until the arbitration panel hearing the dispute into the US$3.45M final tranche was concluded. The panel deadline is April 14th.
Cabinet Secretary Dr Roger Luncheon told a media briefing yesterday that negotiations had concluded with CDC and the goverment team was currently preparing its final report for submission to the Prime Minister.
He noted that one of the options which had been discussed was AC Power pulling out from its present involvements with GPL.
But the source said if the panel ruled in favour of AC Power the investment company, the government might find itself in a position where it has to find close to US$30M to repay AC Power as the company would have an automatic right to put its shares to the government for redemption.
The US$30M covers the US$20M in equity so far injected by AC Power for its 50% stake in GPL. The remaining US$3.45M is still in escrow and US$7M is now in dispute following a Public Utilities Commission compensation order.
The other US$10M would cover other costs including dividends plus interest owing on AC Power’s preference shares in GPL as well as that owing and accruing interest on the government’s preference shares which had been assigned to the investor.
CDC Globeleq owns 40% of Guyana Power and Light and does not consider the investment to have any current value thereby justifying it walking away from the investment, the source said.
CDC Globeleq’s position to the government was if the two sides could not reach agreement on the main issues being negotiated, then it was prepared to walk without a backward glance. However, the government would have to let go of the US$3.45M in escrow.
One of the crucial issues in the negotiations was CDC Globeleq’s request to have the PUC $1.3B compensation order revoked. CDC Globeleq also wanted a cap on any future penalties by the PUC. Further, the company also wanted the system loss targets to be reduced and treated as part of the business plan. However, the government was not prepared to interfere with the PUC order and preferred to await the outcome of the High Court appeal by GPL.
ESBI, the other stakeholder in AC Power and a 10% shareholder in GPL has already decided to walk, also because the investment had yielded no positive returns. The firm invested US$4M and received US$10.8M in management fees in the three years. Its management team has been criticised for not reducing the system losses and ESBI was willing to pull the managers to allow the government and CDC to reach agreement on restructuring GPL.
CDC had offered to invest another US$4.5M in GPL.
Wes Griffin, head of the CDC Globeleq’s investments in Guyana had confirmed that the company was looking to sell its stake in GPL and a government source had identified the US company Leucadia as the potential buyer. Leucadia has had a longstanding interest in electricity supply here and had put in a bid some years ago for the then GEC.
The government is of the view that it has a strong chance to win the arbitration process which centres on whether the PUC compensation order interfered with the effective implementation of rates for GPL in accordance with its licence.
The arbitration panel will listen to arguments on Friday, March 14 and it is expected that the panel would rule by the following Friday given the urgency of the issue.
The government is hoping for an early resolution given that GPL is running into deeper financial difficulties each day. The government is reported to have a contingency plan for any eventuality.
Meanwhile Prime Minister Sam Hinds has informally sent out invitations for the local business community to invest in GPL. He received a number of requests wanting more information.
