US$30M Power Company comes online in Berbice … as GuySuCo gets US$30M to pay off NIS, owed creditors
Gary Eleazar, April 2, 2015, Source
CABINET, Government’s Counsel of Ministers, have approved the creation a new power company, Skeldon Energy Inc (SEI), which, using the generation facilities previously owned by the Guyana Sugar Corporation (GuySuCo), will be servicing primarily the Berbice area under the management of Wartsila. GuySuCo, in turn, will be paid US$30M which will immediately be used to settle a number of owed creditors including the National Insurance Scheme (NIS).
Wartsila in the Management Agreement has also committed to investing an additional US$3M in rehabilitation works on the generation end.
EFFECTIVELY IMMEDIATELY
The announcement was made by Chairman of the Board of Directors of the Guyana Power and Light (GPL), Winston Brassington, who along with Raj Singh, GuySuCo’s Chief Executive Officer (CEO), during a live press conference aired on State television yesterday announced that the agreements are effective immediately (April 1, 2015).
GuySuCo staff previously attached to the generation facilities it once owned, have since been seconded to SEI, to work along with the Wartsila management team.
Brassington, in making the ‘Live’ announcement, pointed to inherent benefits as a result of the agreements/transactions and includes the enhancement of the generation capacity of the Skeldon Wartsila and Bagasse Co-Generation plant.
The three Wartsilla plants in the equation have an installed generating capacity of 10MW, in addition to the 30MW installed capacity of the Co-Generation plant.
It was explained that total generation from the Skeldon facilities – expected to be phased upward in the coming years – “by 2016 will be over 20 per cent of the generating capacity of the entire Demerara/Berbice system.”
According to Brassington, in addition to the US$30M in capital resources that will be going directly to GuySuCo, the new arrangements will lend to a more stable and reliable source of power while at the same time relieving the sugar company of the responsibility to manage the power plant.
GPL/NICIL OWNED
SEI, according to Brassington, is jointly owned by GPL and the National Industrial and Commercial Investments Limited (NICIL).
The financing, he explained, will be in the form of debt and equity and comes from GPL and NICIL in addition to local and international financial institutions.
Brassington said Skeldon Energy Inc., will be funded using equity financing of US$9M and debt financing to the tune of US$21M which has been secured from the local and international financial institutions.
He explained that on the equity side, US$5M will be coming directly from NICIL with an additional US$4M coming from GPL.
Repayment for the US$21M debt financing will be made using earnings from the sale of power to GPL and GuySuCo.
POWER PURCHASE
Brassington explained that Skeldon Energy Inc, will operate with two Power Purchase Agreements (PPA) for the provision of electricity to GPL and GuySuCo.
According to Brassington, “in addition to the existing PPA between GuySuCo and GPL which is being transferred to Skeldon Energy Inc., a similar one will be entered into between SEI and GuySuCo.”
Pressed to expand on the US$21M being sourced as part of the debt financing, Brassington told media operatives that GPL has agreed to loan SEI, US$11M but declined he could not at this time name the institutions supplying the additional US$10M.
“The remaining US$10M will come from local and international institutions. At this time I can’t speak to the names but in due course we will,” the GPL Chairman assured.
Brassington also explained where GPL managed to find the US$15M to put into SEI as debt and equity.
He told media operatives, “the drop in fuel prices has had a positive impact on GPL and so we’re doing this out of available cash-flows.”
According to Brassington, had the Skeldon facilities not been available, the power company would have had to be looking at installing additional generational capacity in Berbice to keep up with increasing demands.
“What we are doing here is seeking to not only maintain but to expand the power generation facilities at Skeldon,” according to Brassington.
The Chairman of the GPL Board of Directors explained to media operatives that “by next year we expect the total power generated out of that plant to increase by 50 per cent, by 2019 the total power should double…this is relative to what we have gotten from that plant.”
He said it is an investment the power company would have had to make sooner or later, “to meet the demands we are expecting.”
MORE THAN ENOUGH
Meanwhile, GuySuCo’s Chief Executive Officer (CEO), Raj Singh, who was also on hand for the historic announcement immediately sought to allay fears in relation to the supply of bagasse for the co-generation plant.
“For 2015, we are projecting to crush at Skeldon Estate, about 650,000 tonnes of cane and out of that we are projecting that we will generate about 275,000 tonnes of bagasse,” according to Singh.
He explained too that, “outside of Skeldon, we have an excess of bagasse.”
Singh pointed to the operations at Albion Estate as an example and pointed out that this facility is also used to supply bagasse for the cogeneration plant at Skeldon.
“We will have more than enough bagasse to run the co-gen(eration).”
He added also that GuySuCo is in the process of procuring a briquetting machine.
This, he said, would briquette bagasse from other estates so that it can be stockpiled for use in out of crop periods.
“So we are projecting we will have more than sufficient bagasse to run the co-gen(eneration) plant.”
NIS
As it relates to the US$30M secured for its power generation facilities, Singh told reporters bluntly, “clearly, this is clearly going to our creditors, our suppliers, our contractors, companies and entities that we owe monies to and we have begun payment already to those creditors.”
He listed among those owed, NIS, “the credit unions, we have a list of contractors and suppliers both internationally and locally.”
Singh explained that what GuySuCo is also looking to do with the US$30M, “is to rebuild confidence with our creditors so that we can continue to have business relationships with them that would serve both of us well…we are working hard to do that.” --- (Gary Eleazar)