GPL has to be accountable, transparent and efficient

I refer to the letter ‘Deferred Tax was not included in GPL’s rate computation’ (SN, June 13) written by Mr Nizam Ali of Nizam Ali & Company, the firm which audited the 2012 financial statements of Guyana Power and Light and which signed the Final Return Certificate (FRC) for GPL’s proposed tariff increase of 26.7%.

Perhaps Mr Ali did not see press release No 33 issued by GPL and dated May 8, 2013, so I quote for his benefit the last sentence of paragraph 2 of the release which states:

“The GPL Final Return Certificate (FRC) was accompanied by a Notice of Compliance issued by an independent firm of accountants and GPL’s 2012 audited accounts that show GPL losing $7.6 billion in 2012” (emphasis mine).

Continue reading GPL has to be accountable, transparent and efficient

GPL cannot be allowed to continue operating with a failed model and incompetent management

On or around April 22 last, the Guyana Power and Light Inc. (GPL) announced it was seeking a 17% tariff increase because of the $5.2 billion budget cut by the National Assembly. Yet only three weeks later, on May 15, the government-owned utility submitted to the Public Utilities Commission (PUC) what is called a Final Return Certificate (FRC) which it claims allows it to increase tariffs by an even higher percentage – 26.7% – effective May, 2013. According to a statement issued by GPL last Saturday, “the GPL Board is actively engaged in planning its implementation.”

According to the GPL, the increase is calculated in accordance with the 1999 Electricity Sector Reform Act (ESRA) and a Licence that allowed the previous private investor to increase (or decrease) its tariffs, using an internationally acceptable methodology based on a rate of return. According to the company, the FRC was accompanied by a Notice of Compliance issued by an unnamed independent firm of Accountants and GPL’s 2012 audited accounts which show GPL losing $7.6 billion in 2012.

Continue reading GPL cannot be allowed to continue operating with a failed model and incompetent management

Response to Sundar Nauth

In yesterday’s online edition of your newspapers (KN, 3 May) you carried a letter subscribed by Sundar Nauth and captioned “Sanction Christopher Ram”. I wish to respond by advising Mr. Nauth that the process of sanctioning a member of the Institute of Chartered Accountants of Guyana can be initiated by a letter setting out the grounds of the complaint and addressed to the Secretary of the Institute, 47, Main Street, 2nd Floor, GCIS Building, Georgetown.

And what is the complaint? It is that he was moved by a letter engineered by Winston Brassington and Bharrat Dindyal, Chairman and CEO respectively of Guyana Power & Light Inc. responding to my letter in the Stabroek News of April 24, 2012. In that letter I expressed concerns about billions of dollars being given to GPL, the mismanagement of the company, and the financial straits in which the management has placed the company. I concluded by suggesting that the granting of further transfers by the National Assembly to GPL should be conditional on the “firing of the company’s Board and their replacement by competent individuals.”

And here was the Brassington-Dindyal bogey: that I used confidential information to which Ram & McRae was privy some ten years earlier when we were the company’s auditors.

If Sundar Nauth had acted less as a surrogate and mouthpiece for the Brassington-Dindyal duo, he would have realised that my letter referred to public information contained in the National Estimates, the company’s annual report for 2010 and the print media. And if he was diligent he would notice that the earliest information I quoted was from 2010!

I wish Sundar Nauth the best of luck as he seeks to have me sanctioned. Should he require any further professional or legal assistance in the process, I would be very pleased to assist him. Without charge!

Most of Guyana’s electricity is not generated by GPL; 80% is produced by GuySuCo and Wartsila

It is hard to believe that GPL’s Chairman Brassington and CEO Bharat Dindyal do not understand the difference between the income statement and electricity rates and capital expenditure and cash flows. It is equally difficult to understand why they would mistake assertion for “insinuation” even describing it as a demonstration of “gross ignorance” (‘GPL denies scare tactics over cut of subsidies’ SN, April 25).

The Brassington-Dindyal statement deserves only a limited response while the letter by the company in other print media deserves none.

Not because of their absurdity or crudeness but to help contribute to an understanding why electricity consumers continue to pay exorbitant rates, why GPL is unable to manage and control expenditure, why a board of independent professionals is so important, why highly paid managers should produce equally high quality results and why their collective failure is making electricity unaffordable.

Messrs Brassington and Dindyal claim that GPL has “foregone revenues of over $27 billion to the end of this year.” They are either delusional or dishonest. The ESRA formula for rates is linked to performance targets, including substantial reduction in system losses by the former private investor. That investor abandoned the company in 2003 and its successor has not met the loss reduction targets. Any $27 billion of foregone revenue is therefore a mirage.

But if Messrs Brassington and Dindyal seriously believe GPL is entitled to the rate increase why do they not apply for and have consumers pay, rather than ask taxpayers to pay? Maybe they understand that with a more transparent rather than disguised tariff increase elasticity of demand would bite and more businesses would invest in their own generation plant. Or maybe they do not understand that the budget’s announcement to subsidise the light bills of pensioners is a realisation that tariffs are already too high for tens of thousands of Guyanese.

“So much for lack of progress,” smugly exude Messrs Brassington and Dindyal as they boast of their performance as top managers of system loss control.

This time, delusion or distortion. According to the company’s annual reports and information released at various PUC hearings, system losses under Brassington and Dindyal in the past six years were: 2007: 33.6%; 2008: 33.9%; 2009: 34.3%; 2010: 31.3%; 2011: 31.6%; and 2012: 31.7%. In other words, between 2010 and 2012 system losses increased despite capital expenditure estimated at over $20 billion or US$100 million during the same period.

And even if the duo prefer to measure the progress over five rather than the more recent three years, the improvement is 1.9% or 0.38% per year. My former boss Grenada Finance Minister Bernard Coard would probably be pleased that I am finally taking his advice.

Embarrassed at the exposure of the widespread super-salaries paid to GPL’s 29 management staff, Messrs Brassington and Dindyal seek comparison with the region. Would they point out a single regional utility that generates less than 20% of the electricity it has available for sale that produces as poor results as GPL does? Or which has a ratio of management compensation to total wages and salaries as GPL does?

Not only are the top personnel in GPL overpaid but they are increasingly so. In 2008 the percentage of key management compensation to total wages and salaries was 9.66%; in 2010 it rose to 12.55%! Incidentally among these highfliers is Mr Kumar Sharma, who is listed as a Loss Reduction Director. Would Mr Brassington describe as “ignorant” or “grossly ignorant” the suggestion that Messrs Dindyal and Sharma should have their salaries tied to performance and loss reduction?

But what about comparing the salaries of GPL’s managers with their peers in other local entities that are so better directed and managed? Here are some revealing statistics. According to their most recent annual reports, the top seven public companies in Guyana paid their entire key management team an average of $131 million for that year. In GPL for 2010 the comparable amount was $272 million, more than twice as much.

And using GBTI as GPL’s nearest comparator with 31 key management personnel versus GPL’s 29, we note that average monthly salary per key management staff member of GBTI is $451,481 per month but at GPL it is $782,600 per month, 73% higher.

Here are some other troubling numbers: GPL’s administration expenses in 2010 increased by a whopping 47% over 2009. And of the 626 GWh power generated in 2010, 501 GWh or 80.03% was produced not by GPL but by GuySuCo (60 GWh) and Wartsila (441 GWh). In other words, while GPL owns generating equipment it contracts out its generation and then buys it back to sell to consumers. It seems to me that if the company was engaged in generation, its performance would probably have been so much worse. This raises the question: what do all those high-paying managers do?

On accountability, Mr Brassington assures us that the 2012 audit report would be issued by the end of this month but says nothing about 2011. So I remind him of this and that a recent company Development Plan projects system losses of 20.8% by the end of 2014.

Finally, to get back to the initial point I raised in my letter that caused apoplexy in GPL. I have no doubt that the National Assembly would entertain a request by GPL of the $5.2 billion it withheld once the company produces a credible plan to use the money sensibly and efficiently.

The operations and management of GPL need to be subject to a thorough performance and efficiency audit before it is given any more public funds. No amount of spinning by Messrs Brassington and Dindyal will convince any informed and independent observer that GPL as presently set up and operated is not a massive waste and a burden on the consumers.

Only $1,000M was requested for GPL’s operations and the National Assembly approved that; the warning of a tariff increase is nothing but scare tactics

Now more than ever I lose hope and faith in our politicians whose words speak louder than their action. But then I see some dishonesty, chicanery or fabrication that upsets me and makes me take up my pen.

In today’s (April 23) Stabroek News Messrs Brassington and Bharat Dindyal, Chairman and CEO respectively of the mismanaged Guyana Power & Light Inc are threatening a 17% tariff increase because of the $5.2 billion cut by the National Assembly. The reasons they give are so dishonest that I cannot help but recall the feigned outrage by Messrs ‘Fuzzy’ Sattaur and Martin Goolsarran when the NCN subsidy was cut last year.

Mr Dindyal was reckless enough to accuse the parliamentary opposition of “a poor understanding of the company’s operations.”

In fact it is more than likely that it is because they not only understand but know that the GPL is among the most poorly operated and managed companies in the history of Guyana that the opposition is reluctant to put $11,255 million in the company in 2013, following the $6 billion in 2012 for which there has been no accounting to date.

Assuming as I do, that Messrs Dindyal and Brassington are not dishonest, then it is they who do not understand. Here is what the Minister of Finance said in the 2013 Budget Speech about the $11,250 million to GPL.

“Budget 2013 therefore provides operating and capital transfers to GPL totalling $5.8 billion to support that company in meeting its cash flow requirements. It is worthwhile to mention that, in addition to the $5.8 billion budgeted to be transferred to GPL in 2013, Government is also budgeting a further $5.4 billion to be provided to GPL to support key projects such as the upgrade of its transmission and distribution network, the loss reduction programme, and other activities required in anticipation of the AFHP.”

They so comingle money that they probably do not even realise that only $1,000 million was requested for GPL’s operations.

The National Assembly approved that sum in full. It is nothing but scare tactics for Mr Brassington to warn about a potential tariff increase following the cut of $5,800 million which, knowing our parliamentarians, will be restored sooner rather than later, as happened last year.

And let me reassure Mr Dindyal that Guyanese understand what is going on in GPL including:

1. That at December 31, 2010 the company had an accumulated deficit of $2,008 million and was indebted to the Government of Guyana for $9,035 million in long-term liabilities, $1,189 million in current liabilities and $402 million in taxes payable, making a total owing to the Government of $10,626 million. The company’s indebtedness would surely have increased in 2011 and 2012, in addition to the $7,500 million it received by way of budgetary allocations in those years.

2. That over the approximately six years of the Brassington-Dindyal partnership at the helm of GPL, line losses have remained stuck at around 32% when they should be no more that 15% -18%. In other words inappropriate policies and inept management at GPL are costing the country in the range of $5,469 million and $6,641 million per annum, based on 2010 turnover.

3. That GPL has failed to table its 2011 Annual Report in the National Assembly which was due by the middle of 2012. The National Assembly should have told the Prime Minister to go and bring the report before we entertain any request.

5. That the cost of fuel in 2013, which accounts for a significant part of annual expenditure, is projected to be less than in 2012.

6. That the company’s procurement is no less tainted than national procurement.

7. That the management is not only incompetent but also overpaid. In 2010, twenty-nine management staff were paid a total of $271 million plus perks. This works out at $9,400,000 per year per person. That would have gone up in the two years since.

8. That GPL does not have the power to increase rates but only the Public Utilities Commission and only after public hearings. Maybe Messrs Brassington and Dindyal should put their threat to the test and open themselves to examination.

Finally, the duo’s spuriously precise 17% tariff increase reminds me of my days in Grenada when Bernard Coard advised me, “Chris, don’t say around 50. Say 47 or 53. People will think you are being honest and accurate.”

Conditional on the granting of any transfers to GPL, the National Assembly should have demanded the firing of the entire Board of GPL and their replacement by competent individuals. Messrs Brassington and Dindyal may mistake the temerity of our politicians as stupidity of our people. We know and understand what is taking place. And it is not good.