FINANCE-CARIB.: Guyana Re-thinking Power Privatisation

By IPS Correspondents Reprint | | Print |

Bert Wilkinson

GEORGETOWN, Feb 27 2003 (IPS) - When the labour movement, opposition parties and consumer groups opposed moves by government here to sell a 50 percent stake in the ailing national power company and hand over management to a U.K.-Irish consortium, they were dismissed as unpatriotic troublemakers.

But less than four years into the deal involving the U.K.-government-owned Commonwealth Development Corporation (CDC) and Electricity Sector Board International (ESBI) of Ireland, the administration of President Bharrat Jagdeo says it regrets partnering with the joint venture group and is contemplating sending it packing from this former British colony.

While the government blames bad management for not fixing the former Guyana Electricity Corporation (GEC), some critics point to international financial institutions like the Inter-American Development Bank (IDB) for pushing the privatisation in the first place.

Relations between government and the group have reached such a low ebb on the back of abysmal failures by the firm created in the 1999 deal, Guyana Power and Light (GPL), that in recent weeks the administration has demanded that leaders of the CDC-ESBI group recall its current crop of expatriate managers and replace them with more competent staff capable of meeting performance targets and cutting soaring operating costs.

Prime Minister Samuel Hinds also called a press conference to update the nation about a looming crisis in the electricity sector, adding that GPL is so broke that it may soon not be able to buy fuel to generate and transmit power.

He warned that prolonged blackouts caused by fuel shortages are a real possibility and could start in a matter of weeks.

”We are taking steps to go to war,” said Hinds. ”We are not bent on keeping AC Power. The range of options includes AC Power going altogether,” he added. AC Power (Americas and Caribbean Power Ltd.) is GPL’s holding company.

Another critic is former GEC general manager Raymond Gaskin.

”This is exploitation of Guyanese. The whole deal is bad,” he says. ”Government was pressured by the Inter American Development Bank (IDB) into privatising the company because the IDB had held up 30 million (dollars) in loans to Guyana for balance of payment support so they just signed. Now the whole situation is horrible. It is a disaster,” added Gaskin, a constant critic of the GPL.

In 1996, the IDB provided a 40-million-U.S.-dollar loan for Guyana to reform its electricity sector. Five years later it supplied another 27.4 million dollars for the country to expand its electricity service.

The U.K.-Irish consortium paid 23 million dollars for the 25-year licence to operate the power company in the 1999 deal.

CDC has made numerous investments in the Caribbean and Latin America, including others that involve privatisation of government utilities, such as in Jamaica.

GPL General Manager John Lynn has publicly complained about the company’s inability to raise rates to match operating costs, particularly massive fuel increases in the last year, and its continuing inability to pay off debts inherited from the former state-owned GEC.

GPL is carrying losses of 600,000 dollars per month and recently ran into further problems when Gaskin won a high court injunction blocking the company’s plan to increase rates by 15 percent.

That hike, the latest of several since 1999, would have brought in 750,000 dollars monthly, more than current debts, but even government, which owns the remaining 50 percent shares, opposed the increase. It says it has yet to receive a single cent in dividends as a GPL shareholder.

The injunction comes in the midst of moves by several of the nation’s largest firms, including the franchise holder of an international fast-food restaurant, to manufacture their own power from generators because it is cheaper.

As a result, GPL has lost several of its high paying commercial customers, which pay much higher rates than domestic householders.

Other customers have turned to solar and wind generation rather than see their utility bills eat up more than 50 percent of their costs.

The Jagdeo administration has been forced to bear the brunt of nation-wide criticism about white expatriate managers at GPL earning about 13,000 dollars per month compared to 1,500 for the highest paid local managers and engineers, and not improving service.

Both Jagdeo and Hinds have said the government will not bail out the company, which this week announced plans to approach local commercial banks for a short-term loan until the final court ruling on the rate hike.

Hinds said the administration was vexed that GPL has failed to cut transmission and commercial losses, linked to leakages in the system and theft by consumers and companies.