By Al Edwards, Business co-ordinatorTHE JAMAICA Public Service Company (JPSCo), controlled and operated by Atlanta based energy company Mirant, is looking to the capital markets (both locally and internationally) to fund an expansion programme that will see an additional 200 megawatts over 5 years at a cost of approximately US$200 million.
Of this US$200 million, JPSCo is expecting to borrow 60 per cent of that figure.
Speaking to Wednesday Business earlier this week, president and chief executive officer of JPSCo, Charles Matthews, said the company was looking to become more efficient as it undertakes a review of its staff complement of 1,800, with a wage bill expected to come in at US$58 million at the end of this year.
INTERIM DIVIDEND
The company did have some good news for its shareholders as its president announced that the JPSCo board of directors at a meeting on September 26, 2003 approved an interim dividend of J$600 million payable to shareholders, effective October 31.
The interim dividend will be the first declared by the company since the Government of Jamaica sold 80 per cent of JPSCo's common stock to Mirant Corporation in March 2001. Government retains 19.98 per cent of the company with the remaining shares being held by a small group of public shareholders.
The majority shareholder, Mirant, will receive a dividend of J$400 million, while the Govern-ment of Jamaica will receive J$120 million.
JPSCo's shareholders were receiving a small return after opting for the past two years to re-invest all earnings back into the company to improve reliability and service quality. Over the past two years, the company reinvested J$7.8 billion for capital improvements and new generation in an effort to provide more reliable and efficient service.
JPSCo made a net profit of J$1.14 billion at fiscal year end March 31, 2002, the first full year after privatisation.
It had net earnings of J$1.17 billion for the nine-month period April to December 2002, having changed its financial reporting period from a fiscal year to the calendar year.
NET INCOME
As a result of the change in reporting requirements from Generally Accepted Accounting Principles (GAAP) to Interna-tional Financial Reporting Standards (IFRS), Net Income is substantially less. This is due to the unrealised foreign exchange losses relating primarily to US$ denominated debt.
Speaking to Wednesday Business last night, Mr. Matthews said, "We are projecting losses of approximately US$5 million for the year 2003. System losses are projected at J$330 million with net income losses (incorporating system losses) are expected to be J$300 million.
Unrealised losses associated with our US dollar debt due to fluctuations in the foreign exchange market stands at US$30 million. The biggest component of our expenditure is fuel which comes to US$220 million. We are considering alternatives to the more traditional oil, such as Liquefied Natural Gas (LNG) and wind turbines.
RECENT DEVALUATION
Carlton Watson , JPSCo's chief financial officer, who is to become its senior vice-president of administration, said: "The recent devaluation of the Jamaican dollar has impacted on our financial performance, substantially.
We are now carrying a US$230 million dollar debt and everytime there is slippage in the exchange rate, we have to recognise the additional Jamaican dollars to cover our obligations.
"Most of our borrowing has been in Jamaica through RBTT. We have used US dollar financing as opposed to Jamaican dollar financing largely because of the interest rate differential. Lately we have been looking at a combination of US and Jamaican dollar financing and this will continue to be the case once we get a better sense of what the interest and exchange rate is likely to be.
In order to fund its capital expenditure, Mr. Matthews said that somewhere down the road JPSCO will consider the viability of a listing on the Jamaica Stock Exchange (JSE).
For more of this story see Friday's Financial Gleaner.
