US$64M cleared for GPL improvements

-830 km of distribution network to be rehabilitated with IDB/EU funds

As announced recently by the Guyana Power and Light (GPL), the IDB and the EU have put together a US$64M financing programme to cut the utility’s losses among other areas.

The Power Utility Upgrade Programme (PUUP) is the latest in a series of expensive financing packages for the utility which has struggled for decades to tame line and commercial losses without much success.

An Inter-American Development Bank (IDB) press release issued yesterday said that the bank has approved loans totalling approximately US$37.6 million and has also secured non-reimbursable investment financing from the European Union (EU) to the tune of US$26.9 million to “help boost the efficiency and reliability of Guyana’s power system through electricity loss reduction measures, improvements in the operational capabilities, and strengthening the management and corporate performance” of GPL.

The release said that Guyana is expecting a surge in electricity consumption during the next decade as a result of the growth of its residential and commercial sectors and the projected return of large customers to the national grid.

“GPL is now facing various challenges in trying to provide additional electricity on an efficient and reliable basis, which include high levels of electricity losses. As Guyana’s energy demand increases, the distribution infrastructure will experience greater stresses, and in turn, this will challenge GPL’s management and its ability to manage electricity supply”, the release said. GPL and its predecessor the Guyana Electricity Corporation (GEC) have battled for decades on the question of power losses.

The release said that previous IDB experience in Guyana and other parts of Latin America and the Caribbean with electricity loss reduction has proven the importance of tackling both technical and commercial losses along with improving management practices and operational systems.

The release said that PUUP is a holistic, integrated approach to support GPL with financing for vital infrastructure investments and technical support for its key business areas. “This support should increase GPL’s overall performance, reinforce GPL’s operational capabilities, and the achievement of a sustained trend in overall loss reduction”, the release said.

The release pointed to the expected results: (1) a sustained trend in overall loss reduction; (2) an improved and accountable management performance against consistent Key Performance Indicators and within minimum international standards; and (3) more modern, efficient, and reliable operational systems in GPL.

Under PUUP, GPL will rehabilitate approximately 830 kilometres of GPL’s distribution network, the release stated.

PUUP will be the first project under the IDB’s new Grant Leverage Mechanism, to be co-financed with IDB resources and those to be provided on a non-reimbursable basis by the EU’s Caribbean Investment Facility (CIF).

The IDB’s financing will consist of up to US$22,500,000 in credit from Ordinary Capital loan resources for a 30-year term, a 6-year grace period. A second IDB credit will total up to US$15,141,750 from the Ordinary Capital/Fund for Special Operations “parallel loans” for a 40-year term with a 40-year grace period. The EU is expected to contribute €19,375,000 (equivalent to US $26,931,250) through a Project Specific Grant (PSG), which will be administered by the IDB, the release said.

On May 30th, GPL Chief Executive Officer Bharat Dindial announced the impending loan.

The announcement came weeks after GPL was rapped by the Public Utilities Commission (PUC) regarding its $7B in system losses for 2013.

In a public presentation led by GPL’s key Directors, Dindial said that with the loan, the company would be able to tackle the huge problem of system losses from a technological standpoint. Dindial called the loan the largest of its kind and spoke optimistically of the expected impact, saying that the bank has given the utility five years to roll out the change but he hopes to get it done much sooner so that Guyana can start seeing the benefits. The continued GPL losses have raised questions about its preparedness to participate in ventures such as the now aborted Amaila Falls Hydropower Project.

Dindial in detailing the focus of the funding said that GPL will direct the investment over the next three years intensely in Region Four, since that region accounts for 72% of the country’s overall losses. He said the approach will be divided into two fronts: a technical and a non-technical one, to be administered through a system of turnkey projects offered to contractors. This, he said, would be geared towards reducing losses by 5% on the technical front and 3% on the non-technical front.

Last month, the PUC said actual losses at the end of last year were reported by GPL at approximately 31%, with a reduction of 0.8%, which was below the company’s in-house reduction target of 1.6%. It noted that the standard set system losses at 28.1% of dispatched power for 2013, down from 28.65% in the previous year.

The PUC said system losses cost the company over $7 billion in 2013 and the cost looked set to continue into 2014 and beyond. “The losses are collectively borne by the company and the Government. Rather than financing the losses as is the common practice it makes sense to identify components of the system losses and make the investment in reducing either singularly or in total each of the loss components. At some point this would have to be done and the sooner a start is made the better,” the PUC recommended.

The new IDB/EU financing comes just as GPL is about to complete a US$40M programme funded by China for the transmission and distribution system which saw new sub stations being built.

Under the MOU that was signed, GPL was to develop and expand its transmission and distribution system with the construction of 110 km of single circuit 69 KV overhead transmission lines, and approximately 1.8 km of 69 kV submarine cable; seven new

69/13.8 KV sub-stations; the expansion and upgrading of two existing

69/13.8 KV sub-stations; and installation of a fibre optic network and Supervisory Control and Data Acquisition (SCADA) system for tele-metering and protection.

The transmission lines and sub-stations would serve to integrate all major load centres along the coast to permit centralised generation using cheaper heavy fuel oil fired sources, and also facilitate efficient distribution of bulk power in the future.

In December, 2007, the IDB announced the approval of a US$12M loan for the power sector which aimed at sustainable reduction of electricity losses among other things.

Apart from aiming to reduce electricity losses, the IDB loan was to support activities in the power sector to improve efficiency by supporting institutional, legal and regulatory reforms, planning and priority setting in the sector that will contribute to sustainable power loss reductions and to strengthen the power company’s capabilities in corporate governance, transparency and accountability.

In September 2011, the IDB announced it had approved a US$5 million loan to boost the efficiency of Guyana’s power system via electricity loss reduction measures and improvements in the operation and maintenance of the distribution network.

Prior to these, the IDB had lent large sums to GEC.

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