Gov’t position on power-company restructuring expected today
By Gitanjali Singh
Stabroek News
March 18, 2003
The government today expects to put its final position on the power company restructuring to AC Power, controlled by CDC Globeleq.
The team will be in Guyana for one week during which time they will be meeting with top officers of the various forces as well as with officials of the Ministry of Foreign Affairs. (A Ken Moore photograph)
CDC Globeleq had been expecting the final marked-up version of its December proposals to restructure the Guyana Power and Light (GPL) last Thursday, but the government informed the group that it had experienced some delays and would deliver this today.
Crucial to the agreement would be the implementation of higher rates now blocked by a court order. Once the block remains in effect, it would delay the implementation of any restructuring plan for GPL. (See court story on page ).
CDC last week indicated it had lost interest in its investment in Guyana and had offered to sell its 50% shares in GPL for US$1 or more, excluding the award of the current arbitration panel. The panel is looking into the disputed US$3.45M in equity, which should have been injected by AC Power into GPL but which was withheld on the grounds that electricity tariffs were not effectively implemented in accordance with GPL’s licences.
If the panel award goes against AC Power, then an offer for the 50% shares would have to take into consideration the US$3.45M in equity to be brought in. The move to sell is in accordance with CDC Globeleq’s position to invest in the emerging portions of emerging markets and to sell its stake in Guyana, Dominica and St Lucia.
West Griffin, Director of CDC Globeleq in charge of the investment in Guyana, indicated that the firm has gone past the eleventh hour in negotiations with the government, and the only way CDC would be prepared to stay on in Guyana is if it could quickly reach agreement with the government on making GPL economically viable. In such a scenario, CDC Globeleq would welcome any investor partner for the operations. However, Griffin had set this weekend as a deadline for any restructuring agreement.
This is expected to coincide with the ruling of the arbitration panel expected by Friday. The panel has until April 14 to rule, but given the urgency of the issue (GPL’s financial status is worsening each day), it is expected to rule shortly.
Meanwhile, the quarterly payment of management fees is due and payable at month end, and Griffin said if no agreement was reached, CDC Globeleq would ask for the managers to be released from their contract as no monies would be available to pay their fees.
CDC Globeleq expects to follow suit shortly after, once released from its contract with the government.
However, the government is reported to be working feverishly to iron out the difficulties in eight crucial areas to save the investment. CDC Globeleq has already said that it does not feel welcome in Guyana and if it should walk, this would impact negatively on Guyana’s drive to secure foreign capital.
The eight issues have to be cleared before CDC Globeleq injects a total of US$9.7M and embarks on a programme to cut commercial losses from the utility.
The firm has given an undertaking not to increase tariffs in 2004 beyond fuel price increases, and to reduce its rate of return from 23% to 19% and its dividends on preference shares from 20% to zero if necessary to reduce the burden on the rate base.
It would aggressively go after commercial losses and use the efficiency savings which resulted to invest in reducing the technical losses.
However, the eight issues which need to be ironed out include revocation of the Public Utilities Commission (PUC) $1.3 billion compensation order, capping future fines at $20M and giving immunity to GPL against court action; a cost, plus management fee arrangement of US$1.5M (the government wants this capped); reducing the management performance targets; changing the tariff setting mechanisms; an incentive scheme for employees; settling what is owed to the old GEC; the government investing further equity into GPL and a timeframe for the equity injection.
