$9.4B deficit recorded by State-owned companies in 2019
…as heavy fuel reliance comes back to haunt GPL
State-run companies under the direct oversight of the A Partnership for National Unity/Alliance For Change (APNU/AFC) coalition Government have recorded a deficit of $9.4 billion for 2019 which represents a 14.1 per cent lower deficit than was projected at the time of the 2019 Mid-Year Report.
This is contained in the Finance Ministry’s End of Year Report, which was released last week. According to the report, public enterprises collected $117.9 billion for the year 2019. This, however, falls short of the amount projected at half-year by $9 billion.
The report attributes this to the Guyana Oil Company Limited not being able to meet its targeted earnings. In addition, the report says that Guyana Power and Light switching from gas oil to heavy fuel oil to generate power played a role.
“At the end of 2019, the overall deficit of the public enterprises was $9.4 billion, 14.1 per cent lower than the deficit projected at the time of the 2019 Mid-Year Report. Revenue collections of $117.9 billion were $9 billion below the half-year projections, mainly due to lower-than-anticipated revenue earnings from Guyana Oil Company Limited (GuyOil), and Guyana Power and Light Inc switching from Gasoil to heavy fuel oil for power generation.”
GPL has a history of using heavy fuel oil, against the advice of industry experts who have long recommended Guyana integrate renewable energy into its power grid. The Amaila Falls Hydro Project, which would have done just that, was shelved soon after the Government came to office. The lack of investors has been cited.
The People’s Progressive Party (PPP) has contended that the Amaila Falls Hydropower Project, could have been generating about 50 per cent more electricity than the entire GPL supply at the time in 2012. But the project was scrapped by the coalition Administration who had controlled the National Assembly by a one-seat majority.
In addition, talks of bringing natural gas onshore for use to generate power have not gone much further beyond talks. Part of a US$20 million loan that Guyana had signed with the World Bank had gone towards funding a study to examine the merits of bringing natural gas onshore for the local energy market.
Meanwhile, oil giant ExxonMobil has said that around 30 to 35 million cubic feet of natural gas would be required for the gas-to-shore project. Data from Norwegian research company Rystad Energy had indicated that less than 20 per cent of the 1.8 billion barrels of oil equivalent (BOE) discovered last year was gas. The Haimara discovery made by Exxon last year was found to have 207 feet of high-quality gas condensate sandstone reservoirs.
Meanwhile, the report further noted that current expenditure for State enterprises came up to $120.2 billion, $5.8 billion below the mid-year projection. There was a low implementation of capital programmes. According to the report, this amounted to just 59.9 per cent of total capital programmes.
“This low implementation rate is largely attributed to cash-flow challenges experienced by GPL, as well as GuySuCo’s inability to finance budgeted capital projects,” the Ministry of Finance also explains in the report.
“Additionally, GuyOil rescheduled some of its projects to 2020 because of the difficulties encountered in the tendering process for the construction of a 30,000-barrel storage facility at the Providence terminal, as well as the unavailability of a suitable location for the construction of a new service station in Region 3.”
The report also shows major decline in several economic sectors in the economy.
According to the report, sugar production contracted by a sharp 11.8 per cent in 2019, with the Guyana Sugar Corporation (GuySuCo) falling significantly short of its production target.
The report also noted that poultry production did not recover sufficiently to overcome the decline recorded at the half-year. This resulted in a 7.8 per cent decline in poultry production in 2019, which in turn led to a contraction of 3.5 per cent in the livestock subsector.
Additionally, the forestry subsector recorded notable gains at the half-year, which persisted into the third quarter; however, these were undone in the final quarter of 2019, resulting in a contraction of 3.9 per cent for the entire year.
Fisheries experienced mixed outcomes in 2019, with finfish production increasing by 19.7 per cent over the previous year, and shrimp production declining by 28 per cent.