The Government of Guyana is putting up the Guyana Power Light Inc (GPL) for re-privatisation with a 50/50 share offering for US$30 million.
The government says the equity investment may open the door to a further US$150 million in debt financing once GPL's performance eventually justifies a 2:1 debt-equity ratio.
The Office of the Prime Minister (OPM) said the invitation represents a challenge for the managers of the country's local money who would have the responsibility to accumulate and invest the savings directly as equity in the infrastructure that Guyana need.
OPM said a consortium investment should allow the relevant multilateral and bilateral agencies to see GPL as a private sector entity again, thus giving credibility to the company being able to contract debt without constraints by the Country Programme with the IMF.
The major agreements to be developed include a Share Subscription Agreement and Shareholders Agreement. It is not contemplated that a Management Agreement would be necessary.
The Share Subscription Agreement would provide for a schedule of share issues tied to the three equal annual payments of US$10 million each.
The Shareholders Agreement would entail the government foregoing dividends for ten years to allow for a return to the consortium, stabilization of tariffs, and desired investment from retained earnings.
The Shareholders Agreement will also look at governance issues, particularly the appointment of the Board of Directors.
One starting position is for the Board to be maintained at the current five members with the Chairman selected by the Government of Guyana from a slate of three persons presented by the consortium.
An equal number of Directors would be nominated by the government and the consortium.
The government is proposing that the consortium be open to all widely held financial institutions in Guyana i.e. all pension funds, the National Insurance Scheme, and all widely held insurance schemes.
The government is promoting GPL as a company in which investment would provide the opportunity for Guyanese financial institutions to make their first experiences in syndicating a significant direct equity investment not mediated through bank loans.
GPL is also being touted by the administration as a relatively safe blue-chip investment earning more than Treasury Bills and bank deposits rate.
The government expects that such a widely contributed local investment mediated though the country's leading money managers would take a big step in the harmonizing of different interests.
Among those would be the great overlap between consumers, employees and equity holders, which would set the stage for a greater understanding and identity of common interests for the mutual benefit of owners, employees and customers.
The government is assuring that investment in GPL today could be undertaken with greater certainty than when the company was first established on October 1, 1999.
OPM is contending that GPL's operations have been significantly improved over the past three years.
Gross revenues have been increased from $7 billion in 1999 to $12 billion in 2003, and collection from billings from about 83 per cent in 1999 to about 93 per cent at the end of 2003.
It is pointed out that GPL is a regulated entity with its gross earnings set by a formula which delivers the anticipated returns once reasonable efficiencies are attained.
OPM is suggesting that the consortium should identify a core team that includes lawyers with corporate experience and accountants with investment experience.
Costs should be budgeted for negotiations at about $10 million for each party, OPM said.
OPM is advising that the consortium team should want to become familiar with the Electricity Sector Reform Act 1999, Public Utilities Commission (PUC) Act 1999, GPL's license, and the annual reports for 2000-2002.
The consortium should also seek to be aware of the interactions between GPL and the PUC between 1999 and the present; the business plans and development and expansion programmes prepared over the past four years; and recent consultant and company reports dealing with major issues – loss reduction, tariff re-balancing, billing improvements.