The Jamaican government on Tuesday put on hold preparations for a public listing of its 20 per cent of the Jamaica Public Service Company Ltd. as it considers its response to the surprise announcement by the Atlanta-based Mirant Corporation that it will sell its majority stake in the light and power company.
“We were just going to hire the consultants to prepare for the IPO (initial public offer),” Technology and Energy Minister, Phillip Paulwell, Tuesday told The Gleaner from Texas, where he is attending a technology conference. “The Cabinet will now have to look at if, when, and how we dispose our 20 per cent.”
The possibility of reacquiring Mirant’s 80 per cent of JPS was also “something we will … have to contemplate,” Mr. Paulwell said.
While such a move would possibly find favour with the Opposition, whose Energy Spokesman Clive Mullings has long argued the light and power company is a strategic asset in which the Government should have a stake, it is unlikely to be a path the administration would follow.
The Government’s policy has been to divest state companies and, to repurchase JPS, would have to find the cash for the buy-back at a time when it is under pressure to cut the public sector deficit and return to a fiscal surplus.
Yesterday Mr. Mullings, a long-standing critic of Mirant, suggested he would not be unhappy to see the U.S. company go, but insisted that whatever the future ownership structure, the Government should maintain a stake in JPS.
“It is a crucial sector and the Government should have a toe-hold in it,” he said. “That has always been our position.”
But, added Mullings: “Our fundamental position, though, is that JPS must be run efficiently, whether in private hands or by the public sector.”
Mirant acquired a majority stake in JPS five years ago when it paid the Government US$183 million for 80 per cent of the company and announced plans to spend approximately US$500 million over a decade to modernise and expand its electricity generating capacity.
The company did accomplish an initial early shoring up of generating capacity as well as the investment of US$120 million for a 120 megawatt plant in Bogue, St. James, bringing its own capacity to 600mW. Private suppliers generate another 180 megawatts of power.
But Mirant soon entered Chapter 11 bankruptcy in the United States, from which it emerged seven months ago.
Then yesterday Mirant announced the plan to offload its operations in the Caribbean and the Philippines as well as to spend up to US$1.25 billion to repurchase up to 43 million of the company’s ordinary shares.
“Our strategic plan reflects our continued commitment to enhance shareholder value, both through the return of cash to our shareholders and through our continuing business,” Mirant’s Chairman and Chief Executive, Edward R. Muller, was quoted as saying.
The formal announcement of Mirant’s plan to pull out of Jamaica and the Caribbean came only days after it named Brazilian, Damian Obigilio, as chief executive officer of JPS, to replace Charles Matthews, who had headed the operation for five years. Although he has a background in energy, Mr. Obigilio’s last job was as head of a private equity investment fund in Brazil, suggesting he would bring to the job experience in asset liquidation.
Gleaner sources say Mirant’s post-Chapter 11 leadership wants to focus primarily on electricity generation, leaving behind distribution headaches. There are also suggestions that Mirant may be looking to the large, fast-growing markets of Asia for expansion outside the United States 14.161mW of generating capacity.
“The suggestion is that they see the opportunities for big bucks in Asia, rather than the Caribbean,” said a Jamaican official.
The performance figures for other Caribbean operations were not immediately available, but last year JPS reported profit of J$1.6 billion (US$24.6 million), representing a slowdown in net earnings during the second half after a robust first half when the company earned J$1 billion. During the first half of 2006, JPS returned net profit of J$610 million, a 25 per cent increase.