Cost of renting generators for GPL almost like purchase price

Aug 19, 2018 News

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The Guyana Power and Light Inc. (GPL) is continuing to struggle with its generating capacity, with the rental of Caterpillar sets still happening. The rentals have been landing GPL with a significant bill.

In 2011, the state company reportedly paid US$900,000 annually for generators that cost US$720,000 each.
In fact, it paid a hefty US$8.6M to rent 12 Caterpillar generating sets for a period of one year. It could have spent just US$2.2M more to buy them all.
The company had explained that the renting the generators, was the only feasible option, as opposed to buying them. The revelations were made when top GPL officials appeared before its regulator, the Public Utilities Commission (PUC).
There were accusations then that the rental was high because of kickbacks.
It was disclosed then that GPL rented the sets from Machinery Corporation of Guyana Limited (MACORP) paying an average of US$60,000 monthly to rent each set.
Each of the generating sets was rented then for a base rental of US$43,000 every month, whether they were used or not. If they were used, that base rental only catered for 200 hours of work. Anything over the 200 hours automatically bumped up the rental to US$60,000 monthly.
The makers of the sets were retailing one for US$900,000 (G$180M) back in 2011, it was reported.
GPL had said that it decided to rent against purchasing, because it did not have up-front capital at hand to go ahead and purchase the Caterpillar sets and in any case, the company did not want to be burdened by maintenance costs which were covered by the rental fee.
The sets were seen by GPL as short term.
Since then, GPL has boosted its generating capacity, commissioning a 26 megawatt power plant at Vreed-en-Hoop. But the company is saddled with engines that are in some cases more than 20 years old.
This past week, the company faced major problems with a number of engines down in Anna Regina. It is rushing generating sets from Berbice to that Region Two power plant.
GPL is also disclosing now that more than seven years later it is still saddled with rental generators, which are placed at its Essequibo locations of Bartica, in Region Seven, and Anna Regina, Region Two.
In answers to questions from Kaieteur News recently, GPL said it will discontinue renting generators once two new power stations – at Anna Regina and Bartica – are completed and commissioned in a few months’ time.
Currently, there are two Caterpillar sets being rented – they are each 1.5 megawatts and are at Bartica and Anna Regina. There are none in the Demerara and Berbice areas, the company said.
“Capacity within the Demerara/Berbice Interconnected System will be boosted when a new 5.5 MWs generator is commissioned at Canefield during the last quarter of 2018.”
According to GPL, there are good reasons for rental of the generator sets.
At Anna Regina, it was explained that there are four GPL-owned sets, three of which have combined capacity of 4.5 MWs. The average peak demand on the Essequibo Coast is about 4.6 MWs.
“The 1.5 MWs rental Cat Set ensures immediate reserve capacity to cover for temporary unavailability of any of the GPL owned units and provides capacity required to satisfy peak demand,” GPL explained.
In Bartica, there is a 1.5MWs GPL-owned generating set in operation.
“Normal practice is to have a reserve capacity equal to 1.5 MWs to eliminate load-shedding should the operating unit become temporarily unavailable. Peak demand within the township is 1.6 MWs therefore, the 1.5 MWs rental set provides additional generation capacity to meet peak demand,” GPL said.
The company stressed that currently, two new power stations are under construction in Anna Regina, Essequibo and Dogg Point, Bartica.
“Once these are in operation, there will be no need to continue rental arrangements. The stations should be completed for commissioning at Anna Regina during the fourth quarter of 2018 and the first Quarter of 2019 at Bartica.”
GPL insisted that the rental units provide additional generation capacity that enables it to better meet its mandate to provide stable and reliable power supply to customers.
“Each set is billed per running hour and the cost is capped at 75,000 USD per month. The cost includes after sales service inclusive of spare parts and technical expertise. No cost is incurred if the unit is not used.”
GPL also disclosed that it bought two Caterpillar sets from MACORP- in July 2017 and June 2018 respectively.
“The purchases were necessary due to an urgent need for additional generation capacity at Anna Regina and Bartica. Also, given the expected period before commissioning of the new stations, purchasing was more economical than paying rental costs.”

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