GPL reprivatisation policy approved -- Luncheon
Kaieteur News
April 14, 2007
Guyana Power and Light Inc. (GPL) is to be reformed for reprivatisation, according to Head of the Presidential Secretariat, Dr. Roger Luncheon, yesterday, during his post Cabinet briefing.
He noted that Cabinet has approved a policy and had determined a strategy for refurbishing the power company. The government expects that at the end of five years the company should become profitable and therefore ready for private investment.
The Cabinet-agreed document that outlines the strategy to sustain the state company, identifies several interventions to be implemented.
Some of the identified strategies include loss reduction, improvement in transmission and distribution, outsourcing the generation of power, infrastructure works, and improvements in the commercial system, particularly relating to Information, Communication and Technology (ICT) applications and records.
“Cabinet expressed an expectation that the implementation of the strategy should see the company being transformed into a viable option, at which time it will be open for private equity investments in Guyana ,” said Dr. Luncheon.
As it relates to the source of bidders for the privatisation process to succeed, Luncheon said, “In five years, once the expectations are realised making GPL a viable, profitable entity, the problem will be in excluding rather than including the range of investors that would possibly be attracted.
“…Most people are aware of huge sums of capital accumulated in the financial sectors of Guyana , a large amount of which is externalised for investment opportunities elsewhere.”
Dr Luncheon added that it will be a policy of attracting the same funds to be vested in the development of Guyana and its economy.
“I don't have any doubt that in five years, having implemented the policy and strategies outlined by Cabinet and achieving a viable GPL, domestic capital would definitely be attracted to investments in GPL,” Dr Luncheon predicted.
Luncheon also stated that there will be no added Government expenditure to finance the refurbishment strategy of GPL.
He said that the only money from the public treasury to the power company comes by the way of expenditure on services used in the many government sectors. These would be the payment for power consumed.
GPL also benefits from loan agreements negotiated by the government. This past week, Government released US$607,742 secured from the Inter American Development Bank (IDB).
At present, GPL is the main supplier of electricity in Guyana , but over the years, ownership of the power company changed hands.
The International Power Company (IPC) of Canada ran the Georgetown-based company in the very early days.
Subsequently, the Demerara Electric Company was established in 1925 when it purchased the assets of IPC; then the British Guiana Electricity Company (BGEC) came into being in 1957, and in 1960 it purchased the assets of the Demerara Electric Company.
After Independence in 1966, the BGEC was nationalised and the Guyana Electricity Company (GEC) was established, completely owned by the state.
Thirty-three years later, the Government of Guyana divested 50 per cent of its ownership and control and the company was renamed Guyana Power and Light Inc.
The investor was a UK-based consortium comprising the Electricity Supply Board International (ESBI) and the Commonwealth Development Corporation (CDC).
The divestiture failed and the company once again became entirely state owned in May 2003.
Synergy Holdings, a European entity, had signed a Memorandum of Understanding with Guyana for the supply of hydropower. Yesterday, Dr Luncheon said that regarding the state of the affairs with Synergy Holdings and the Government the MoU between the two entities entails the issue of hydro power that forms part of the refurbishment strategy for GPL.
It comes under the caption of outsourcing the generation of power.
He added that another quota of the MoU, which deals with the procurement of a four-unit Wartsila plant to provide generation of power, has encountered difficulties and has already been mooted as failed.
Prime Minister Samuel Hinds recently announced that the four-unit Wartsila plant from Mexico , to be procured for the supply of 25 megawatts of power to the Guyana Power and Light (GPL), will no longer be procured.
It is unclear as to what were the difficulties that caused the deal to fail.
Dr Luncheon noted that the Office of the Prime Minister and the principals of Synergy are examining ways within the context of the MoU to deal with the 25 megawatts of power, and this is an ingredient of the deal which represents the improvement of generation capacity.
The Wartsila plant was to be procured as a short-term arrangement awaiting the construction of a US$300M, 100-megawatt hydropower plant at Amaila Falls , Kuribrong River , by Synergy.
The hydro-power project is based on an initial study that was carried out between 1974 and 1976 in Guyana to explore the hydroelectric potential in the country under a grant from the United Nations.
The survey was conducted by Montreal Engineering over a two-year period, and a number of sites were identified. These were further refined to three.
Further studies by the developer in 1997- 2001 related to the demand for power and the economics, environmental, ecological, and political impacts of developing each of these sites have led to Amaila as the location of choice.
The Amaila storage dam site would be located near the top of Amaila Falls and would impound the waters of both the Kuribrong and Amaila Rivers .