Fuel cost burns deep into GPL’s revenues…

May 19, 2012 News

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Guyana to put US$80M equity in Amaila Falls hydro project

Increasing demand over the next four years will force Guyana to spend millions of dollars more to buy additional generators, the country’s power company warned yesterday.
By that time, the ambitious US$840M Amaila Falls hydro project is expected to kick in to meet the additional demands for electricity, says Chairman of the Guyana Power and Light Inc (GPL), Winston Brassington.
That project will be the country’s most expensive and has been marred by controversies, especially over the hefty costs.
Brassington yesterday said that financial closure is expected by year-end with Guyana likely to plug US$80M in equity into the project.
The official was at the time speaking during a public presentation of GPL’s state and its future at the Regency Hotel, Hadfield Street.
Despite advertising the event, during which consumers would have been given the opportunities to vent their frustrations and raise questions, the chairs remained empty at Regency, save for media operatives and representatives of the regulator, Public Utilities Commission.

According to the official, current indications of demand point to a need to increase generation capacity by another 20 megawatts in the next couple of years.
New regulations mandate GPL to publicly report to the public and PUC regularly.
Last year, over $18M was credited to the accounts of consumers after the utility company failed to process applications and other transactions in time, in breach of new requirements.
“GPL is more accountable and responsible to the public,” Brassington assured.
US$175M
Over the last six years, the power company saw US$175M in investments being plunged in a number of capital projects including new generators from Wartsila. The money came from Government, the Petro-Caribe Fund and China’s Export/Import Bank.
Additionally, as GPL struggled to meet demands for power, government had deferred taking dividends with the cash being ploughed right back into that state-owned company, the Chairman revealed.
It is clear that more money will be needed to expand GPL’s activities in the lead-up to the hydro project being realized.
Within the last three years, more than 35 megawatts of Wartsila power was added to the country’s capacity with a major project underway to install new transmission lines stretching to Moleson Creek, East Berbice with nine new sub-stations linking the three regions.
The idea is to ensure more reliable and stable power since current lines are ancient and maxed out and unable to take much more.
According to Brassington, GPL is also facing an unprecedented challenge with thousands of new connections to be made every year. While in 2004, Guyana had 26,000 subscribers, last year, this jumped to 160,000-plus. Some 9,000 new applications were processed last year.
GPL’s collections have also seen a significant increase from $18.8B in 2007 to $27.6B last year. This was due to new customers and a rate increase. It also came despite GPL being owed by a number of customers including M&CC which owes $700M for street lighting.
According to Brassington, revenues last year indicated that 90 per cent of customers were residential with less than half of the revenues coming from just 561 large scale businesses.
Losses still high
One of the major problems for GPL continued to be its technical and commercial losses, despite major investments and initiatives. Technical losses have to do mainly with leakages from faulty transmission lines while commercial losses are mainly theft.
The GPL Chairman lamented hardship by the power company to successfully prosecute electricity thieves, despite thousands being caught.
Meanwhile, the official also painted a bleak outlook for GPL’s fuel purchases. The company spent US$48 in 2005 to buy fuel, this year that figure is expected to climb to US$125. Fuel purchases account for 85 per cent of expenses with the company now reviewing the consequences of the recent $1B cut from the $6B subsidy that government had allocated in the 2012 national budget.
The government subsidy is crucial to prevent tariff increases from being passed onto consumers and $1B would bite deep into the GPL’s finances, the official said. It is more than likely that maintenance will suffer because of the cuts.
Currently, some 70 per cent of power now comes from Wartsila, a foreign company that has the contract to maintain Government-owned generators.
According to Brassington, US$175M is a drop in the bucket and it would take significant more investment to keep up with demands.
The US$840M budget for the hydro project and the US$175M spent by GPL in recent years would mean that more than US$1B would be spent on the electricity sector by 2016, he said.
Prime Minister Sam Hinds, who has responsibility for the electricity sector, expressed “disappointment” and anger at the poor turnout by the public yesterday.
He argued that Guyanese workers with their current earnings would understandably find it hard to pay more for electricity. Current costs are already determined, based on generator size, fuel and other costs.
The PM also drew comparisons to the current prices and benefits of the cheaper heavy fuel oil (HFO) against diesel. Guyana has in recent years moved to buy more generators that use the HFO fuel. He also blasted the critics of GPL, noting that the company was trying its best.

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