A stable dollar, no hurricanes and a non-fuel rate increase of up to 29 per cent late last year helped bump Jamaica Public Service Company’s (JPS’s) net profit to US$19.7 million ($1.7 billion) for the last three months of 2009 to close off the year netting US$42.2 million ($3.7 billion).

JPS made a loss of US$7.7 million during the comparative period in 2008. The company’s profit performance resulted from a US$40-million jump in revenue over the corresponding quarter in 2008 to US$233.1 million, and a corresponding reduction in operating expenses of US$23 million to US$27.8 million.

Revenue was affected by fluctuations in the global price of oil used to

produce electricity.

“The primary driver for the increased Operating Revenues in the fourth quarter of 2009 vis-à-vis the fourth quarter of 2008 was the increase in fuel costs,” said JPS in response to Business Observer queries. “The new non-fuel rates did not take effect until November 2009.”

Indeed, while the energy charge that the Office of Utilities Regulations approved last year represented an increase in rates of 23

to 29 per cent, JPS fuel cost rose from US$108 million in the last quarter of 2008 to US$142 million.

“While fuel prices were much lower on average in 2009 vs 2008, there were significant increases in fuel prices during 2008 up to Sep ’08,” said JPS. “However, there was a significant fall in fuel prices during the fourth quarter of 2008. By contrast, fuel prices have risen steadily throughout 2009, such that fuel prices in Q4’09 were notably higher than the fuel prices in Q4’08.”

JPS also saw increased cost associated with power purchased from Independent Power Producers (IPPs) — from US$12 million to US$17.8 million — as generation problems faced by one of the IPPs in 2008 were addressed by the last quarter of 2009.

JPS passes on most of the fuel cost on consumers while the cost of purchased power is billed to customers.

Operating expenses on the other hand fell as “JPS did not face a hurricane or tropical storm last year, as it had in previous years, so expenditure in this area was significantly less in 2009”, added the light and power company.

Higher net profit also resulted from considerably lower net finance cost — down from US$21.1 million to US$8.1 million. This was primarily due to foreign exchange losses that were incurred in the last quarter of 2008 as a result of the Jamaican dollar losing 11.7 per cent of its value against the US during the period not occurring in the last quarter of 2009.

For 2009, JPS made US$42.2 million ($3.7 billion) in after-tax profit over 12 months ending December 31, which was 4.5 times more than a year prior.

The majority Japanese- and Arab-owned company paid out US$24.5 million in dividends (US$24.5 million:2008) from its net cash generated by operating activities at US$63 million versus US$5.7 million a year prior.

Its cash and equivalents balance at year-end was US$16 million versus US$15.3 million a year prior. The company’s working capital also strengthened to US$95.1 million versus US$88.9 million a year prior.

The company’s long-term loans increased to US$253.1 million versus US$245.9 million a year prior, but its equity actually increased US$14.2 million to US$399.7 million compared with the previous year.

In March 2009, Japanese-based Marubeni Corporation sold a 40 per cent stake in JPS to Abu Dhabi National Energy Company’s (TAQA) for US$320 million for 50 per cent of Marubeni Holding’s Caribbean power assets. The deal grew TAQA’s power assets to 11,650 MW from 10,500 MW, and extends TAQA’s energy value chain to power transmission and distribution. TAQA is growing so fast that its Caribbean joint venture with Marubeni will aid it in tripling its size to US$60 billion in a few years. Its assets now stand at US$23 billion.

Even then, Marubeni TAQA Caribbean (MTC), the majority shareholder in JPS, said yesterday that it is restructuring its operations as part of the organisation’s commitment to continuous improvement.

“Following a detailed review of its operations, MTC has decided to significantly reduce its staff complement at its head office in Atlanta and this extends to expatriates assigned to the Caribbean business units,” said JPS in a Monday release to the Jamaica Stock Exchange (JSE). “It is in this context that MTC has advised that Mr Gary Osborne, chief financial officer, will no longer be with JPS as of March 31, 2010.”

Marubeni originally bought US-based Mirant Corporation’s Caribbean-based operations in April 2007 for US$1 billion including related debt of US$350 million, power purchase obligations of approximately US$153 million and estimated working capital at closing. The net proceeds to Mirant from the sale were some US$565 million after payment of transaction costs estimated to be approximately $14 million.

Mirant’s Caribbean business included controlling interests in Jamaica Public Service Company and Grand Bahama Power Company. Mirant also owned 39 per cent of PowerGen, the owner and operator of three power plants in Trinidad, 25 per cent of Curaçao Utilities Company which provides electricity and other utility services and a US$40-million convertible preferred equity interest in Aqualectra, an integrated water and electric company in Curaçao.

The Jamaican Government sold JPS in 2001 for some US$201 million.