Letter of the Day | Don’t delay sale of Gov’t’s JPS shares
Please allow me to weigh in on the issues raised by the opposition spokesman on energy, Phillip Paulwell, and reported in the article, 'Unwise to divest government stake in JPS now' (The Gleaner, Friday, January 27, 2017).
First, we are very encouraged by Mr Paulwell's recommendation that the Government of Jamaica's shareholding in the Jamaica Public Service Company (JPS) be sold so in such a way as "to ensure that Jamaicans are given the opportunity to acquire publicly held shares in the company". The JSE endorses this position and looks forward to the day when such open and transparent divestments that will widen the ownership base becomes the norm in Jamaica, rather than the exception.
On the matter of delaying the divestment, however, we respectfully beg to disagree with the only rationale being offered, namely that the JPS's modernisation efforts will result in increased value that will be lost unless the Government waits until some undefined future date.
The challenge with this line of reasoning is that, in properly functioning markets like ours, sellers and buyers build their expectations into current price. In fact, current market price is conventionally determined by estimating the present value of expected future income streams. JPS's efforts towards increasing its generating capacity and using more diverse and efficient energy sources have been in the public domain for a long time, and therefore, any potential seller or buyer of JPS shares would factor an expected increase in future yields into the likely price of the shares today, after possibly offering a small discount for new investors to take on the risk of realising value from those efforts.
Delaying the sale would mean that the Government would defer cash inflows while simultaneously accepting the risk of the expected value not being realised and also in facing potentially less future demand for the shares if that additional value has already been harvested.
We suggest that, because of the potential for this divestment to free government resources, share wealth among the Jamaican people, energise local investors, and provide funds that could be used to reduce our national debt, there is a need to be decisive. There is a need to strike while the iron (and the market) is hot.
So there is no time like the present. It would be a shame if this sale be allowed to suffer further from the paralysis of analysis.
Deputy General Manager
Jamaica Stock Exchange