GPL gets financing nod for US$65M modernization project

Jun 26, 2014 News

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-new transformers, hiring of managers, meter technology targeted

In one of its largest programs to date, the state-owned Guyana Power and Light Inc. (GPL) has been approved almost US$65M to help reduce losses while at the same time increase its efficiency.

The project is designed to ready GPL for the coming of hydro-electric power.
According to the Inter-American Development Bank (IDB) yesterday, the US$64.573M program will be used to enhance operational efficiency of GPL, improve corporate performance and fund infrastructure investments to reduce overall losses.
“This new program will rehabilitate approximately 830 kilometers of GPL’s distribution network by implementing an integral approach to tackle overall losses while strengthening GPL’s management and technical capabilities.”
It may also include hiring of experts, possibly from outside of Guyana, to help make GPL more efficient.
IDB approved loans totaling approximately US$37.6M and has also secured non-reimbursable investment financing from the European Union totaling approximately US$26.9M. Specifically the monies will help boost the efficiency and reliability of Guyana’s power system through “electricity loss reduction measures, improvements in the operational capabilities, and strengthening the management and corporate performance of GPL.’
According to IDB, reducing overall electricity losses can improve GPL’s financial performance, while alleviating the government’s fiscal commitments with regards to the energy sector.
IDB said that the country is expecting a significant increase in electricity consumption during the next decade as a result of the growth of its residential and commercial sectors and the expected return of large customers to the national power grid.
Challenges
“GPL is now facing various challenges in trying to provide additional electricity on an efficient and reliable basis, which include high levels of electricity losses. As Guyana’s energy demand increases, the distribution infrastructure will experience greater stresses, and in turn, this will challenge GPL’s management and its ability to manage electricity supply.”
IDB said that its previous experience in Guyana and other countries in the Latin America and Caribbean region have proven the importance of approaching electricity loss reduction measures in a way that tackles both technical and commercial losses, while highlighting the value of supporting improvements in management practices and operational systems.
“The Power Utility Upgrade Program (PUUP) is designed as a holistic, integrated approach to support GPL with financing for critical infrastructure investments and technical support for GPL’s key business areas. This support should increase GPL’s overall performance, reinforce GPL’s operational capabilities, and the achievement of a sustained trend in overall loss reduction.”
After implementation, IDB said that it expects GPL to record a sustained trend in overall loss reduction; an improved and accountable management performance against consistent key performance indicators and within minimum international standards and a more modern, efficient, and reliable operational system.
Under the IDB’s Grant Leverage Mechanism, the program will be the first to be co-financed with resources and those to be provided on a non-reimbursable basis by the European Union’s Caribbean Investment Facility (CIF).
The total estimated budget is US$64,573,000. The IDB’s financing will consist of up to US$22,500,000 in credit from Ordinary Capital loan resources for a 30-year term, a 6-year grace period. A second IDB credit will total up to US$15,141,750 Ordinary Capital/Fund for Special Operations “parallel loans” for a 40-year term with a 40-year grace period. The European Union is expected to contribute €19,375,000 (equivalent to US$26,931,250) through a Project Specific Grant (PSG), which will be administered by the IDB.
New technology
Earlier this year, GPL officials said the program will include the changing of old transformers, improving metering technology and a host of other interventions including hiring of qualified personnel. One component may very well be the introduction of concrete or steel posts to replace the largely aging and hard-to-get wallaba ones.
To date, it will be among the most challenging of projects for GPL which over the years has been concentrating mostly on increasing its generation to meet growing demands. Because of the absence of cash, it had led to critical infrastructure, like transmission lines and transformers being affected, with no new investments.
There have been fears that GPL’s current infrastructure, because of its leaky lines, transformers and equipment, would not have been ready to take off increased power, including from any hydro electric project, leading to waste and losses. Theft of electricity has also been a major concern with the project expected to introduce new technology to address this.
Currently, a new 26mw plant at Vreed-en-Hoop, West Demerara, is being built to meet growing demands from especially new housing schemes. Another transmission line project with seven new substations, to the tune of over US$40M, is being run along the coasts.
The PUUP project would be seen as a major shift in GPL’s attention, from finding monies for new generators to improving its efficiency; reducing losses in the process.
GPL has around 170,000 customers on the coasts.
Losses including technical and commercial had been a worrying 30-plus percent for GPL.
Studies have found that weaknesses in the distribution network increase technical losses, due to the low capability of handling the distributed energy and also hinder efforts to reduce commercial losses, due to lack of antifraud type installations and adequate control support.
It has been noted that these factors, together with low technical and executing capacities of GPL, high costs of generation and constraints to raise already high tariffs, contribute to poor financial results and constrain capital expenditures, among other undesired consequences.

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