Chief executive officer (CEO) of the Jamaica Public Service Limited (JPS) Michel Gantois indicated that demand growth targets for electricity in Jamaica have consistently fallen below projections, and that the company is now depending on developments in the electrical vehicle and tourism sectors to revive increased usage and demand for electricity.

Gantois, addressing Jamaica Observer reporters during “The Boardroom,” a monthly forum for business, further stated that the post-COVID-19 recovery of commerce and industry was expected to positively impact electricity demand.

Gantois confirmed that ambitious projections of five-seven per cent growth in electricity demand, previously mooted in various sectors, for the island, have not materialised in the last half-decade.

“The reality is that we have been experiencing more in the region of one to one and a half per cent [demand growth] annually. Our peak demand right now is [from] 2017. We have not seen an increase since 2017.

“In terms of driving demand, from our side it’s difficult. We are not able to drive industrial growth. However, hopefully, demand will resume after, especially with recovery in the hospitality sectors,” Gantois said.

Turning to the company’s plans for electrical vehicle (EV) services, he stated, “EV is our best bet [to improve demand]. With more electricity being bought and paid for, it will reduce the rates for everyone. It’s hard for us to design anything else beyond that. More and more electric vehicles will have a good impact on tariffs and for everyone. We are [also] waiting on commerce and industry to pick up in activity.”

In his comments made in the company’s 2020 annual report, Gantois noted that reduced demand within the commercial and industrial sectors, particularly the hard-hit hospitality sector, led to deficits in core revenues which were too great for residential usage to compensate.

These losses, he outlined, were somewhat mitigated by the group’s diversification initiatives into the provision of operation and maintenance services for entities within the energy industry which resulted in operating revenues totalling US$888.7 million, which represented a less than one per cent increase against the previous year.

Meanwhile, fuel and gas costs declined as a result of the COVID-19 impact on movement and the subsequent diminished demand.

The company also benefited from reduced costs of sales, with its increased reliance on more efficient generation plants (South Jamaica Power Company Limited and NFE South Power Holdings Limited) resulting in the annual cost of sales totalling US$525.1 million, down nine per cent against the previous year.

Overall, operating expenses (including impairment losses on receivables) rose to US$251.8 million, an increase of US$29.2 million compared to the previous year. Right of use assets from lease arrangements and their associated depreciation charges contributed US$23.5 million towards the increase, as did the enhanced provisioning for expected credit losses on receivables of US$12.4 million.

The company’s net finance costs were US$80.3 million against the US$55.6 million of the prior year as a direct result of the additional interest on lease arrangements from Power Purchase Agreements, which became fully operational during the year.

The group’s investment in an associated company, South Jamaica Power Company Limited, generated a return of US$8.2 million, which, along with the other factors mentioned above, contributed to the overall net profit after tax of US$31.1 million earned for the year.

This represented a return on equity of approximately 6.1 per cent, as a percentage of US$506.8 million in total equity compared to 9.5 per cent for the previous year

Gantois noted in the annual report that, in response to the COVID-19 pandemic and the corresponding decrease in overall economic activity, the group undertook a variety of initiatives to mitigate the financial impact of reduced collections and sales by controlling economic activity including curtailing several capital projects and sustaining activities essential to administering basic operations.