Disconnecting companies leave GPL short
-needs US$20M capital over next two years
By Gitanjali Singh
Stabroek News
May 4, 2003
Guyana Power and Light (GPL) faces a real threat to its revenue base with the withdrawal of a number of private businesses from the national grid and Prime Minister Sam Hinds says that the company may need to proceed faster with tariff rebalancing.
However, Hinds said that the immediate focus was to keep the power company going in the next three months and to secure investments for the utility of US$10M over each of the next two years.
Banks DIH, one of the largest purchasers of power from the national grid, has announced that it intends to invest in a new three megawatt medium speed power generation set to save itself from the escalating prices.
Clifford Reis, chairman of the company, said that the electricity bill of the company moved from $120M in 2000 to $160M in 2001 to $239M in 2002. He said the estimated bill for 2003 would more than double at $550M (an increase of 130%). He said with the investment in the generation set, the company would save $160M per year.
Robert Badal of Guyana Stockfeeds yesterday indicated that at current electricity prices, he could buy a new generator every six months and it would still be cost effective for his firm. He said he could not depend on power from GPL to run highly sophisticated automated electrical equipment or it would be damaged. Badal is now moving to invest in a co-generation unit using rice husk.
Other large users of electricity who have disconnected from the grid in recent times include Didco, which has a number of generators running its chicken operations. A host of other businesses which are not already off the grid are contemplating doing so given the constant rise in electricity rates which has been over 100% in the last three years.
It is the business community from which GPL expects most of its income as it cross-subsidises the cost of electricity to residential consumers.
The Prime Minister denied last week that the government was considering a block on the importation of self-generation sets.
However, he is of the view that if all the costs were factored into the private generation of power, it would be more cost effective to stay with the power company.
However, the government has not crafted a policy response to the loss of customers from the national grid as Hinds pointed out that the present focus was to keep the operations going.
The new board has already announced that it intends to focus on commercial losses in a heavy way and argued against legitimate customers paying for the illegal acts of others.
The company needs financing to fix defective meters and to embark on a programme to reduce the system losses and reduce the cost of electricity to consumers.
Hinds is promoting within the government and with the board of GPL the floating of a bond in a private placement to raise the monies needed to make the immediate corrections necessary to the system.
The Prime Minister’s view is that an interest rate three percentage points above the current treasury bill rates could be offered with a potential for a waiver of the withholding taxes on the interest to attract capital. Additionally, he is seeking to have this debt transformed into equity at the end of five years. His target is institutional investors including insurance companies and pension schemes.
The commercial banks have been experiencing lower returns on treasury bills last year which, when the reserve requirement and the interest paid on deposits are factored in, realise a negative return. But they are limited in the kind of investment outlets they can engage in, with equity financing one such constraint.
The Prime Minister is hoping that a private placement for funds for GPL could be made before the end of June.
It is expected with the new management team in place, some measures would need to be urgently taken to retain business customers on the grid.
The company earlier last month announced rate increases in the order of 16% to recover for the rise in fuel costs in the first quarter. These rates would apply to bills issued in April and May. Any new rates would apply from June 1.
