JPS J$1.4b forex fallout
Monopoly light distributor Jamaica Public Service Company (JPS) recorded close to US$15 million (J$1.4b) in foreign exchange losses last year, reflecting one of its worst currency shocks ever.
The amount shows the brutal impact of depreciation of the Jamaican dollar on one of the largest local companies.
The forex losses in the calendar year reflect mainly the increase in cost to service JPS's borrowing.
The company disclosed US$14.8 million of forex losses in 2012 compared to US$3.2 million in 2011. The dip was based on the 7.3 per cent depreciation of the Jamaica dollar against the USD arising in part from uncertainty of an International Monetary Policy agreement. The dollar closed the JPS financial year ending December at J$92.98.
JPS unaudited 2012 financials did not significantly explain the forex losses, and queries to the company were unanswered up to press time. JPS listed the loss as a gain but then added the amount to other costs - indicating an error.
Previous audited financials explained that the power utility incurs foreign currency risk primarily on "purchases and borrowings" that are denominated in a currency other than the United States dollar.
"The company manages foreign exchange exposure by maintaining adequate liquidity resources in the appropriate currencies," stated JPS in its 2011 financials.
The utility purchased US$777 million worth of fuel for the year ending December 2012 and holds US$353.5 million in long-term loans.
Last year's forex loss was among the worst on record since the company assumed foreign ownership in 2001.
Five years ago, in 2008, when the currency lost 15 per cent of its value, the company recorded US$8 million in forex losses.
In periods before 2008, when the company reported its earnings in local currency, the foreign exchange losses were: J$1.9 billion in 2003; J$313 million in 2004; J$620 million in 2005; J$593 million in 2006; and J$807 million in 2008.
JPS is owned by Japan's Marubeni Corporation, 40 per cent; South-Korea-based Korea East-West Power (EWP), 40 per cent; Government of Jamaica, 19.9 per cent; while 3,000 shareholders own the remaining 0.1 per cent of the shares.
The utility reported net profit of US$12.7 million (J$1.18b) last year on sales of US$1.14 billion (J$106b).
Equity increased US$7.6 million to US$387 million (J$36b).