By Al Edwards, Business Co-ordinatorTHE country's leading provider of electricity, Jamaica Public Service Company (JPSCo), operated and controlled by United States
energy giant, Mirant, is making a concerted effort to expand its operations and is looking to access capital to do so.
When Mirant took control of JPSCo some two years ago, RBTT provided an initial US$130 million to re-finance existing short-term debt that was on JPSCo's books. At that time the interest rate was high at 23 per cent but eventually came down to 10 per cent in May 2007.
That loan was followed up with additional project financing of US$75 million, this time accessing funds from International Financing Corporation (IFC) together with RBTT.
Speaking with The Financial Gleaner, JPSCo's Chief Financial Officer Carlton Watson said: "We have been undergoing working capital financing with Republic Bank out of Trinidad who have been trying to get into the Jamaican market cautiously."
President and CEO of JPSCo, Charles Matthews, drew attention to the impact of the slippage in the exchange rate on the company's finances and in particular its ability to service its obligations.
"Previously, under Jamaican accounting standards you didn't have to show that impact on your profit and loss accounts statement now Internal Financial Reporting Standards (IFRS) requires that you show it as an expense even though it is not an actual expense, it is an unrealised type of expense. Luckily, for the last three months, the currency has stabilised because it could have got a lot worse for us."
JPSCo is a growing company and it will still need to go to the capital markets. Senior personnel have declared that JPSCo will seek a mix of raising both international and local capital and that it will be looking at the entire region to see whether it has the capacity to absorb that level of financing.
Mr. Matthews went on to say that the real indicators of JPSCo's performance was Return on Equity (ROE) and net income. ROE for the year to date 2003 stands at 8.20 per cent. The company's president and CEO stressed that ROE must be improved and he is looking to get it up to between 15 to 20 per cent to convince Mirant that Jamaica is a good investment.
"We have to focus upon the things we have control of, which essentially is JPSCo's performance. We will be paying particular attention to ROE, efficiency and customer service. Many people think we can just raise our prices whenever we choose, which is not so, we have to go through the regulatory process. Our sales are still below the target we set ourselves."
JPSCo is currently undergoing a review process of its operations which it expects to complete by the end of first quarter next year. It will re-evaluate how it motivates its 1,800 workforce and put in place stringent performance management processes. It is currently seeking to come to terms with a new agreement with the unions. JPSCo will be focusing on customer interfacing and sees this as the key to keeping customers content.
The country's main electricity supplier is keeping an eye on both its technical and non-technical losses which amount to nine per cent each and total losses of US$36 million. Mr. Matthews points to the high level of illegal activity and those who fail to pay their bills as very damaging to a business that is capital intensive.
Electricity usage is expected to grow by 4 per cent over the next year and the company is looking to supply the country with an additional 200 megawatts of electricity over the next five years. Only this week the electricity outfit submitted its expansion plans to the Office of Utilities Regulators (OUR).
"Most of the load growth is residential and commercial which is not a high load factor for our operations. Ideally, we would like to see plants that come into Jamaica operate 24/7. What we are building our capacity for is that 6-9 evening period, when people return from work, turn their TVs on and the rest of their electric appliances. After 9 things go a bit dead so we are hoping to get a better spread of it. It would be great to get plants working on cheaper power supply from between 12-7 a.m. (time-usage rates)." Mr. Matthews has suggested to the Government switching to daylight saving time.
UPDATE ON MAJOR PROJECTS
BOGUE COMBINED CYCLE PLANT
JPSCo's new power plant in Bogue, Montego Bay, is now fully on-line, contributing a total of 120 megawatts to the national power grid.
JPSCo has invested over US$100 million in the construction of the combined cycle plant, which brings the company's total generating capacity to approximately 780 megawatts. This will move JPSCo's reserve margin from under 20 per cent to almost 30 per cent, thereby significantly enhancing the company's ability to provide more reliable supply to customers, while performing extended maintenance on the other plants.
The power plant is unique in that it utilises combined cycle technology, which is recognised internationally as one of the most advanced and efficient means of generating electricity.
The new Bogue plant consists of three individual units: two combustion turbine generating units with a total capacity of 80 megawatts and one 40-megawatt steam generating unit. The two combustion turbines will be fired on diesel fuel but are capable of conversion to natural gas at any point in the future. Heat from the exhaust of both these combustion turbines will be harnessed to produce steam by way of two heat recovery steam generators that will be used to drive a steam turbine capable of producing an
additional 40 MW.
The combined cycle technology allows for greater efficiency of conversion, that is, it will utilise less fuel to generate each unit of electricity relative to the company's other generating units. This will result in reduced fuel costs
to JPSCo, and ultimately
to customers.
MAJOR MAINTENANCE PROGRAMME FOR OLDER GENERATING UNITS
While the company seeks to increase its generating capacity, it is also engaged in an ongoing maintenance programme for the existing units. The company is currently spending in the region of US$20 million each year for maintenance in order to reduce the forced outage rates on its older generating units.
LEAST COST EXPANSION PLAN
The company has submitted a proposal to the OUR for its next phase of generation expansion.
STRUCTURAL INTEGRITY PROGRAMME
As part of a programme to improve the integrity of its distribution network, the company has changed over 5,000 wooden poles across the island, replacing them with concrete poles at a cost of approximately $160 million.
STREETLIGHTS
Between January and July 2003, the company had repaired approximately 11,500 lamps and installed close to 2,300 new streetlights.
ORGANISATIONAL REVIEW
In an effort to improve the
efficiency of its operations, the company is currently carrying out a top-to-bottom company-wide review of its organisation and exploring the possibilities of outsourcing some of its operations.
A number of changes are to be made at the senior management level, to provide better focus on critical areas in order to improve productivity and provide better customer service. These changes will be completed by the end of October, after which the focus will be on the other levels of
the organisation.
UPDATE ON NEGOTIATIONS
There has been significant progress in the wage negotiations between the company and two of the unions representing employees (UCASE & Managers' Association), and the company is optimistic that collective bargaining agreements could be in place before the end of the year.
