A Jamaica Public Service technician repairs a street light on Hope Road, St. Andrew. Mirant will net more than US$350 million from the sale of its 80 per cent stake in the power company. - File

Mirant Corporation will net, after backing out debt and other financial obli-gations, an estimated US$350 million, from the sale of Jamaica Public Service (JPS), which is being offloaded with its other Caribbean energy assets to Japan's Marubeni Corporation, business sources said yesterday.

A fortnight ago Mirant announced Marubeni's planned US$1.082 billion acquisition of the light and power generating distribution assets in Jamaica Bahamas, Trinidad and Curaao, but did not provide a break-out specific valuation for the individual entities.

However, finance minister Dr Omar Davies, did tell Parliament that Mirant, which at announced that the overall purchase included US$350 million in portfolio debt and US$153 million on power purchase obligations, that the value of the Jamaican component was in the region of US$800 million.

Fixed assets

JPS' fixed assets are recorded on its balance sheet at $40 billion (US$588.2 million). Neither Mirant, which owns 80 per cent of JPS, nor the Jamaican government have since offered further details on the deal. Davies did not respond to requests Tuesday to clarify the figure he gave lawmakers in Parliament.

But Wednesday Business sources explained that when the debt and power purchase obligations are deducted from the purchase price, the equity value of Mirant's Caribbean operation was closer to US$580 million. Mirant had said it expects to net US$565 million from the sales.

The Jamaican portion of that value was in the region of US$350 million to US$360 million, the sources said, meaning that the equity valuation of the rest of Mirant's Caribbean operation was about US$220 million.

"However, in the value of the Jamaican asset, Mirant and Marubeni included an estimated US$12 million to US$15 million in cash that is held in the Mirant subsidiary that owns JPS," the source said. "That cash has to be backed out, leaving a net equity value for the local light and power company of around US$350 million."

Not a 'killing'

On the face of it, therefore, Mirant would not have made the financial "killing" on the JPS sale, as characterised by shadow energy minister Clive Mullings when Davies had spoken of a US$800 million price tag on the light and power company.

When Mirant bought JPS in 2001, it paid US$201 million cash for the 80 per cent stake and over the six years pumped another US$160 million into the company as its share of the US$200 million spent on the operation to upgrade plant and infrastructure.

This capital spending include US$80 million (J$120 million) on a new generating plant at Bogue, St James, and around US$10 million spent on a 25 megawatt facility just after it bought the company to ease electricity outages facing Jamaica ahead of its more full scale programme.

In the sixyears of its ownership of JPS, Mirant has increased generating capacity by 145 megawatts.

However, with electricity consumption growing an estimated six per cent annually, the new owners will be under pressure to add new capacity while lower generating and distribution costs to Jamaican consumers who have among the region's most expensive electricity.

JPS has been a profitable operation which played a not insignificant role helping to lift Mirant out of bankruptcy 15 months ago after more than a year of Chapter 11 bankruptcy protection.

Its last earnings report recorded profit of $1.97 billion from revenues of $48 billion.

business@gleanerjm.com