Nothing is going according to plan for the Guyana Power and Light Inc (GPL) except their cash richness. Blackouts continue unabatedly, they have failed to submit their Annual Development and Expansion Plan to the Public Utilities Commission (PUC) for the years 2017-2021 as mandated by the Electricity Reform Act and the perennial problem of technical and commercial losses are not declining. According to a release from the last report issued by Chairman Prem Persaud at the PUC, “the bane of the company remains the cost of system losses calculated at some GY$80 billion” over a 15-year period.
The latest published financial statements inform us that the company has spent some GY$1.3 billion in capital expenditure for 2016, 53 per cent less than it did in 2015. The main reason the company informs the nation for this is that an increasing share of the generation is now being done by an outsourced company by way of an operations contract and from the purchase of electricity from Skeldon. An insider at GPL told me that since these two arrangements, there is not a power generation problem in Guyana but a transmission and distribution (T&D) problem. Unfortunately, the new Board since May 2015 failed to invest adequately in the T&D problem and the long-suffering consumers continued to suffer into 2018.
Source GPL 2016 Audited Accounts
Total assets of the corporation increased in 2016 by GY$9.5 billion or 15.8 per cent, even as plant and equipment declined from GY$2.4 billion and accounts receivables declined by G$2.1 billion. The largest drop in this plant and equipment asset class was the massive depreciation of the T&D facilities, which speaks to its aged status and thus growing unreliability and hence more blackouts.
In the case of collections of old debt, GPL did a great job in 2016 of pursuing old accounts causing outstanding receivables to be reduced. But there is also a significant provision for bad debt in 2016 booked at GY$8.3 billion and up from GY$7.9 billion in 2015. Some 14 per cent of the total assets of the company are financed by capital contributions from the Government of Guyana, which was converted into share capital. So the taxpayers are paying from two sides – light bills and the tax collection, which is being diverted in portions to GPL.
GPL’s turnover decline with good reason. Customers were able to benefit from a 10 per cent net reduction in electricity rates with effect from March 1, 2016, as a result of fuel rebate granted by the Government. But concurrently the largest portion of the generation cost (fuel cost) dropped by 19 per cent in 2016, which resulted in a net gain for the company. In spite of this positive drop in the generation cost, net profit before tax for 2016 remain stagnant at GY$3.4 billion. I am further advised that its profit before tax for 2017 topped GY$5.1 billion rather than the original figure that I projected last week and the main reason for this was the creeping increase in the fuel prices affected the company more than I projected. But more importantly is that the inefficiencies at GPL also increased.
In 2016, the net cash inflows at that company were GY$8.5 billion compared to GY$3.4 billion in 2015. I was again told that GPL’s net increase in cash for 2017 topped GY$10 billion but that was eroded in the first half of 2018 as the high fuel price ate into the cash significantly. However, as the fuel prices decline, the expectation for the next six months is positive. GPL is expected to recover its cash inflows and should pass it back to the consumers by way of a fuel rebate or invest it in repairing the T&D Network.
And the balance sheet confirms these truths. The business had GY$15.8 billion in the bank at the end of 2016. I was told they have over GY$20 billion in their bank account at the end of 2017. All the evidence points to the fact that this company is cash rich, but yet they have the audacity to provide a quality of service that is deteriorating as the coffers remain strong.
The bottom line remains GPL remains badly managed and will continue to be the greatest deterrent to new investments in Guyana as cheap and reliable electricity continues to elude the nation.