GPL records massive $2B after tax losses in 2008

Nov 14, 2009 News

-spiralling fuel prices blamed

Spiralling fuel costs last year caused the Guyana Power and Light Inc. (GPL) to make losses of almost $2B, an increase of 22 per cent from the previous year.
According to the GPL 2008 Annual Report, Chairman Winston Brassington in his notes also said that notwithstanding the losses, the state-owned company saw a 1.9 per cent increase in generation and a 15.7 per cent increase in revenue, over 2007, the latter due largely to tariffs increase in February 2008.
The 2007 and 2008 Annual Reports were presented to Parliament on Thursday by Prime Minister Sam Hinds.
GPL saw a net increase of 4,718 new customers under its expansion programmes. According to Brassington, the continuing high cost of fuel accounted for 71% of the company’s total expenditure in 2008. During that year, GPL also paid a peak price of US$188 per barrel, a 47.7 increase over the 2007 peak.
“In absolute terms, GPL’s fuel bill increased by $4B moving from $14.5B in 2007 to $18.5B in 2008, a 28 per cent increase in fuel costs.
To cushion the impact of rising fuel prices, Parliament approved a subsidy of $3.7B to GPL of which $3.25B was used, all in an effort to prevent a second tariff increase during the course of the year.”
Debt write-off by the government; a reduction in the return on equity from 23 per cent to eight per cent and the conversion of preference shares and debt to equity were among some of the measures taken by the shareholder to further reduce the pressure on tariffs.
According to Brassington, throughout the year, the company struggled with high fuel prices which created a serious cash flow problem that resulted in delayed orders for materials and supplies needed for the acceleration of the loss reduction programme.
“The losses remained quite high with technical losses at the end of 2008 estimated at 11.4 per cent and 22.8 per cent for commercial losses.”
GPL, Brassington noted, is pursuing renewable energy sources which include the 30mw bagasse co-generated facility at GuySuCo’s new estate at Skeldon, a 13.5mw wind power project at Hope Beach and at least 100mw from the Amaila Falls Hydroelectric Project.
During 2008, GPL signed an agreement with the government for the three new Wartsila sets which would add another 20 megawatt to the grid.
The US$31M agreement also included a 69KV interconnection between Kingston and Sophia.
In October 2008, the government also signed a Memorandum of Understanding with EXIM bank of China to finance a number of key projects including several substations according to the regions.

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