It is probably good politics for Mr. Bruce Golding, the Opposition Leader, to loudly raise concern that Mirant Corporation has issued a prospectus for the sale of its 80 per cent of Jamaica Public Service (JPS) while the Government has not yet decided what ought to be its future role in the light and power company.
Mr. Golding has called for the Government to act with urgency. In fact, what Mirant has done is normal and sensible business practice, but in the long run will have no practical impact if the Jamaican Government, its minority partner in JPS, is opposed to the prospective buyer. For it is so, and notoriously known to be so, that there exists in the agreement between the Government and Mirant, a provision precluding the U.S. firm's sale of its holding in JPS for up to 10 years without the prior agreement of its partner.
It is clear, therefore, that Mirant at this stage is lining up bidders in its Dutch auction, who, ultimately, may or may not meet the approval of the Jamaican Government; or, who may be required, if they are intent on getting a hold of the Jamaican energy market, to adjust their offers to meet national requirements.
We would advise the administration, therefore, that while paying attention to any time limits specified in the partnership agreement, that it avoids acting in haste and arriving at a decision that may not be in the long-term interest of Jamaica. Indeed, the future of JPS must not be subject to a narrow political squabble, but be placed in the context of its strategic role in the economy. Our suggestion, in that regard, is that Prime Minister Simpson Miller invite Mr. Golding to have his technical team sit with government experts to arrive at a consensus, if possible, on the medium- to long-term energy requirements of the country and the least cost, and practical options for achieving these. This would involve reviewing options developed by JPS and now being analysed by the Office of Utilities Regulation (OUR). In the final analysis, however, the decision on who gets the Mirant stake will be that of the Government.
Opposed to state re-acquisition
We would be strongly opposed to the re-acquisition of the shares by the state, on several grounds. In the first instance, JPS, if it is bought as a going concern, as it must, will for some years maintain its monopoly as a transmitter and distributor of electricity. While there are independent power generators, they do not operate in the context of a typically free market environment. We are not particularly fond of monopolies in any circumstance, but in government hands they can be particularly bad, in the absence of tough regulatory oversight, tending to be troughs for corruption and political cronyism. That may not have been the case with JPS, but it is a circumstance to be avoided.
Furthermore, the re-purchase of Mirant's stake, which will be valued substantially higher than the US$180 million it paid five years ago, would require a big cash outlay that would have a severe impact on the fiscal accounts and weaken the Government's ability to narrow the public sector deficit and head towards a balanced budget. Re-nationalism would also be a bad signal to private investors that state control is back in vogue when the message ought to be that Jamaica is open for business.
Of course, Mirant's decision provides the authorities with an opportunity for a robust analysis of Jamaica's energy options; whether, once the current protections expire, the market should be fully opened; whether changes should be negotiated at this time; and whether the OUR needs to be further empowered to ensure that strategic goals are achieved and the rights of consumers protected.
Mr Golding's concern should not be that there is no word from the Government about what it intends to do about Mirant's interest. We would encourage Mr. Golding instead to be ready to examine keenly the worth of likely local and foreign investors who may want to replace Mirant.
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