President Ramotar says GPL rental costs are disturbing, if true

Apr 03, 2012 News

US$900,000 generator rented for US$720,000 annually…
President Donald Ramotar yesterday toured operations of the cash-strapped Guyana Power and

President Donald Ramotar

Light Company (GPL) and did not dismiss questions raised about the lack of prudent spending at the utility.
“If what they say is true, it is obviously something to be concerned about,” Ramotar said regarding statements by GPL officials that a new Caterpillar generator costs US$900, 000, but the company rented 12 generators last year at a cost of US$720,000 each.
The revelation comes at a time when GPL is lamenting a mammoth fuel bill coupled with a growing demand for electricity.
The government plans to plough $6 billion into the company this year, saying this is meant to address its financial constraints and avoid already burdened consumers from paying higher electricity tariffs.
Ramotar toured the major operations of the company, namely its Kingston and Sophia operations in Georgetown, and those at Garden of Eden, East Bank Demerara.
“Power is important to a country’s development and I wanted to get an appreciation of the challenges that GPL faces,” Ramotar told Kaieteur News at the end of his visit to the Kingston operations.
For Ramotar, the biggest challenge GPL faces is to develop the capacity to catch up with the growing demand. He said that the company would need to generate another 20 megawatts of electricity even before the much touted Amaila Falls Hydroelectricity Project begins operations.
On Sunday, Kaieteur News reported that GPL last year paid a hefty US$8.6M to rent 12 Caterpillar generating sets for a period of one year when it could have spent just US$2.2M more to buy them all.
Last week, the company said that renting the generators was the only feasible option, as opposed to buying them.
Each of the generating sets is actually rented for a base rental of US$43,000 every month, whether they are used or not. If they are used, that base rental only caters for 200 hours of work. Anything over the 200 hours automatically bumps up the rental to US$60,000, monthly.
GPL sources confirmed that GPL worked the generators to the maximum; therefore what it has been paying is the full US$60,000 rental, per month.
This means that rental cost for the 12 generators amounted to some US$720,000 for each month last year.
In any given month, GPL loses a few days of work from the generators, to facilitate “top-up maintenance.”
Further, the generators are subjected to scheduled general maintenance every two months. With the “top up maintenance” and the “scheduled maintenance” time it means that every two months GPL does not benefit from the usage of each of the generators for about one week. However, it still has to pay the full rental cost.
The makers of the sets are retailing one for US$900,000 (G$180M), according to GPL officials.  This means that purchase cost is a mere US$180,000 above the rental price.
GPL has said that it decided to rent against purchasing, because it did not have up-front capital at hand to go ahead and purchase the Caterpillar sets.
GPL’s Chief Executive Officer (CEO), Bharat Dindyal, along with his Deputy Aeshwar Deonarine, in replying to questions, insisted that it is far more beneficial to rent the sets since the state-owned power company is not burdened by maintenance costs; maintenance fees are covered by the rental fee.
Further, Elwyn Marshall, Divisional Director (Operations) said that the generators which are rented are not fit for long-term operations, and are more ideal for a temporary solution.
This is despite the fact that in June last year GPL said that it had 22 of the same Caterpillar sets in the system.
Six Caterpillar sets brought in last June are still in the system at Versailles and Leonora, West Demerara, and at Garden of Eden, East Bank Demerara, among other places.
Government is moving ahead with plans to build a 165-megawatt hydro-electric project at Amaila Falls, Region Eight, to meet growing demands.
GPL has said that electricity demands has been growing at least 10 per cent annually, outstripping investments and power production which until recently countrywide was over 80 megawatts.