Korean company will improve operations at JPS — Mullings

BY ALICIA DUNKLEY Observer senior reporter dunkleya@jamaicaobserver.com

Wednesday, July 20, 2011

ENERGY Minister Clive Mullings has defended government's decision to allow Marubeni Corporation, current majority shareholder of light and power company Jamaica Public Service Limited (JPS), to transfer 50 per cent of its shares to a Korean-based entity.

Making the announcement in Parliament yesterday, the Mullings said that the transfer — for which Cabinet gave its approval on Monday — would see the Government owning 19.9 per cent of shares in JPS, Marubeni 40 per cent, Korea East-West Power Company Limited (EWP) 40 per cent and some three thousand shareholders the remaining 0.1 per cent of the shares.

Mullings said that the "EWP is expected to significantly improve the operations of the JPS".

"It is proposed that by 2014 we will have 360 megawatts being brought on board and that by 2016 an additional 120 megawatts," Mullings said in response to questions from Leader of Opposition Business in the House Michael Peart as to the timeline that consumers would begin seeing the benefits of the transfer.

"EWP is in the business of generating electricity from various fuel types, including Liquefied Natural Gas, and it is anticipated that with the project at the stage that it is at, we will be able to bring everything on line by the last quarter of 2014 in terms of the operations of the 360 megawatts to tie that in with the provision of LNG. So, it is very important that we get all these factors aligned so that we can deliver to the consumer lower energy prices," Mullings said.

He, however, noted that "the cheapest plant is no plant, except when every consumer makes an effort to conserve energy. We need at this point in time to see conservation as well," he added.

The company is fully owned by the Government of South Korea and ranks as the largest thermal power company in the Republic of South Korea, owning and operating in excess of 9,000 Megawatts of power generation facilities in the country.

Mullings said the company, which provides 11.5 per cent of Korea's electricity on a nationwide level, also provides 24 per cent of the electricity supply by the use of LNG in South Korea; which is some 2,100 Megawatts of electricity from LNG. By contrast, the energy minister said the total electricity demand for Jamaica currently stands at 800 megawatts.

However, he insisted that the company was not brought in on a whim.

"Notwithstanding the impressive résumé of EWP, the Government deliberated long and hard on the application by Marubeni to sell the 50 per cent of its shares to EWP as all factors had to be carefully considered. The main purpose being to aggressively pursue the best strategy to significantly reduce the high prices local consumers have to pay for electricity," Mullings told Parliament.

He said, in the interim, the Government will continue to press the JPS into implementing measures aimed at improving the efficiency of its operations and passing on the benefits to consumers. He said additional amendments to the JPS licence have also been negotiated.

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COMMENTS (24)

james allen
7/20/2011

hee mullings,you digbat..people dont want improvements done on power company,they want competition,so that their monthly electric bill can be less..how can a country encourage investments and job creations by the investors,if said investor has to pay so much in electricity and other things..how can the hard working citizens pay out big chunk of their income to pay an electric bill..jamaica is small nation,so you actually need 2 or more of each big business,to cut monopoly,to benefit the nation

Tom Stroke
7/20/2011

A criticism of the JLP is that they do not communicate effectively. You need to change that. Explain the issue such that even Mr. Wormington can understand. I would hate to see this issue become a political football, where Jamaica come out the looser. We desperately need relief from JPS. In addition, growth at the rate to lift this country cannot be achieved from the present dispensation.

Tom Stroke
7/20/2011

It is no stretch of the imagination that JPS is a burden to ordinary Jamaicans. The govt need to explain to us as you would do to a 4 year old why we are not considering breaking the monopoly at this time. What is the cost to so? What is the forecast end result of breaking / keeping the monopoly? Some of us are aware that the govt. hands are tied as a result of the initial sale. Failure by the govt. to explain this will create the scenario we witness with the X6 suspect and the police. contd

Jay Brown
7/20/2011

Folks doing the maths are doing it incorrectly.
Marubeni owned 80% of the shares, Gov ~ 20%
Marubeni sells 50% of their 80% , to EWP this leaves them with 40%.
So Marubeni 40%, EWP 40%, GOJ 20%
40% + 40% +20% = 100%

John Levy
7/20/2011

The bloggers on here know nothing about Power Generation and distribution

God Bless
7/20/2011

50% of 80% is 40% I think 50% still represent half of something. Alicia Dunkley made the error in the reporting as Marubeni owns 80% of the shares.

John Levy
7/20/2011

Will someone tell us what is the rate JPS buys power from the private power companies ? What % of the cost per Kwh is for Transmission and Distribution, What is the cost for generation equipment ? My calculation is Fuel=70% or 21c US,T&D 20%=6c US, and Generation equipment 10%=3c US. Tell me which one would be the best one to reduce.

Carlos Bryson
7/20/2011

Fools die for want of wisdom. Not my words.

K Davis
7/20/2011

Observer, ur editing is off as pointed out before. they sold 50% of 80% so they now have 40%. Breaking the monopoly is not an easy feat cuz you would then need to find an investor willing to lay down the immense capital required to set up the physical infrastructure for distribution. U may say it happened with Digicel/Flow but note that the telecoms business is very profitable (esp in JA) while energy is not as straightfwd. Maybe better to facilitate ppl getting off the grid thru alternatives

Oral Webster
7/20/2011

@ Derrick Allen... We "bloggers" don't need to suggest any methods of breaking up the monopoly... That's why we elect (brilliant) politicians to solve those issues. It's their job to find a way.. And it's our constitutional right to raise hell and blog to kingdom come when they don't do what our taxes pay them to do!!
Can we get a little bit of " youthful exuberance" here? Let the govt ask Paulwell how he broke the monopoly in the tele com sector... Or ask Warmi and Enid Bennet for ideas.....

Ainsworth Cole
7/20/2011

Till death do us part with JPS, we are with them for life, even if they are draining our pockets and sucking the life blood out of us, we can't do nothing about it, we can't change nothing, we have to suck it up. So why we all just don't shut up and go sit down one side and take the beaten that we are getting. JPS own and control us, when it comes to energy in Jamaica they are the Energy God. Pay up and shut up Jamaican people nuh better nuh deh after all if its not JPS there is no other, hahaha

norris Richards
7/20/2011

Mr. Mullings had the Energy porfolio, he was a total failure, now he has been given the portfolio again, what has happened, is he more competent this time, what experience had he gained since he left the portfolio. The decision that are been made the result is like a dog chasing its tail.
How to break-up the JPS monopoly is to have a full enquiry with prosecutorial power to prosecutor wrong doers. One option is an enquiry , to look into the first and second sale of the JPS, the companies who did the evaluation both times when the JPS was sold, what happened why the JPS price quadrupled in 4 years without any dramatic occurrence in the energy production, oil price, increase in paying customers .
A SECOND OPTION IS TO use the govern share in the JPS company and use it to split-up the JPS.
A third option is to ask the Maribeni to split the JPS Company in to two separate companies, transmission and generation to justify their costing regime.

Sean H.
7/20/2011

"Korean company will improve operations at JPS"
*
Hmmm, where have we heard that one before? I suspect that the improvement will be to the parent company's profitability NOT in generation & distribution efficiency and lower bills.

Izett Gordon
7/20/2011

There are certain industries which ought to be in the hands of locals. Power/energy is one such entity. We complain when our nationals become dual citizens and seek public office; reason: divided loyalties. Yet we willingly, almost eagerly divest those industries which will help in our development and sustained livelihood. Until we trust our own to manage the commanding heights of the economy Jamaica will continue to be the economical football of well heeled foreigners.

Derrick Allen
7/20/2011

Wish some suggestions from bloggers as to how to break-up the monopoly.

Codea Jackson
7/20/2011

I agree with Mr.N.Henry and J.Brown and also I agree with Mr.Warmington 100% the people of this country wanted to see a change...we are seeing a change yes...but for the worse I am now one of those young individuals within this cvountry who sees a better life out of it....you are only oppressing us...

7/20/2011

@Kingston Bailiff
hahahahaha. i was saying the same thing when i read the article. I believe dem mean 40% marubeni and 40 for the korean company.
The government really need to start doing major research though, cause if this new company's strategies raise power bill, im leaving jamaica. But unfortunately that wont help the poor :(

real southy
7/20/2011

govt 19.9%,Marubeni 50%,Korean East West 40%,remaining 0.1%=110%.
someone needs a math class here

johnny gordon
7/20/2011

50 + 40 + 19.9 + 0.1 =110%
as pointed out by Kingston Bailliff.
Maybe we can get the maths right and then start talking about what can be done in 2011 to get measurable relief for consumers in 2011. It seems that with all the hue and cry there has to be something out there that is workable. Can the OUR provide short term help? The Govt. may need to address the monopoly issue with the public since it "appears" that there are possibilities.

2kool .
7/20/2011

Hopefully by 2014 all Jamaican household will have switched to solar energy.

Wayne Soprano
7/20/2011

Remember Marubeni is basically a hedge fund, this move is inevitable,they are merely taking profits. EWP is in the power business but the minister failed to mention if they plan to encourage solar/wind generation in their sourcing mix.We don't produce LNG or natural gas, so the impact of lower prices is not in the mix for the long term. Business class in Jamaica has money, are they willing to buy a piece of this business,there's money to be made as we see but are Jamaicans ready to own or whine.

Nicolas Henry
7/20/2011

This move is similar to that of a hostage taker that has received ransom for the release of his victim. Instead of releasing his victim, he then turn the victim over to another captor, now the new hostage taker can collect another ransom to release the victim. There's no relief in this deal for Jamaicans, I guarantee you that.

Kingston Bailliff
7/20/2011

See why the light bill come so high?
The total shares in JPS is 110%.

Jay Brown
7/20/2011

Mr Mullings with all due respect sir, we have heard this before. You need to tell us specifically how and by when operations will improve and also what does that really mean.
Does that have to do with quality, reliability or cost of the service provided or all of the above.
This is the third time JPS has changed hands since it was first sold in 2001 and at each change we hear " better service and lower cost".
See more commonsenseja dot wordpress dot com. Too many announcements and no results.

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Korean company will improve operations at JPS — Mullings