— gov’t expected to save millions of dollars when contract ends in 2019

POWER Producers and Distribution Incorporated (PPDI) is expected to earn between US$2.7M and US$3.9M in profits when its three-year contract with the Guyana Power and Light Company (GPL) ends in 2019.
With this forecast, the government is expected to save millions of dollars had it still been utilising the services of Finnish company Wärtsilä.
With effect from January 1, 2017, PPDI took over the operations of Wärtsilä, which had been offering operational and maintenance services to GPL since 1994.

At an extremely cheaper rate, PPDI – a self-sufficient, Guyanese-run company – has been

offering the same services to GPL, and is expected to save the Government in excess of US$2M annually.
PPDI is generating the electricity, while GPL is responsible for distribution.
In an exclusive interview with the Guyana Chronicle, PPDI Chief Executive Officer (CEO) Arron Fraser explained that the new power company is charging GPL a fixed rate of US$16.87 per megawatt of electricity – US$3.64 less than the fee (US$20.51) Wärtsilä’s had proposed for 2017.

With an estimated production of 650, 000 megawatts of electricity per year, GPL is expected to pay PPDI some US$10.9M or approximately GUY$2.3B per annum, saving GPL US$2.4M.
Fraser explained that under Wärtsilä, GPL would have had to pay US$13.3M for 2017.
With an average yearly expenditure of US$9.6M to US$10M, the PPDI CEO said the company’s return is set way below Wärtsilä’s benchmark.
“Overall we are looking at a margin of just about 8-12 per cent return on revenues. It is a lot less than what our competitor (Wärtsilä) would have gotten,” Fraser explained, while noting that PPDI’s lower bound is set at US$2.7M and upper bound, US$3.9M over the three-year period.

NO OUTSOURCING
Asked how PPDI is able to produce power at a far cheaper rate than Wärtsilä and still make a profit, the CEO said the fully staffed company is able to save due to the fact that it has the ability to perform its own overhauls, and as such, there is no need for outsourcing.
Another factor, he said, is the profit margin set by PPDI.
“Our returns are much lower than what Wärtsilä wanted. We just ask for 8-12 per cent return, and that is significantly less than what Wärtsilä would have set as a benchmark, so therein lies another factor that allows us to charge a cheaper price.”

It was noted too that PPDI’s budget would fluctuate on the basis of its output.
“The fluctuation is strongly correlated to the amount of maintenances that we do… so for instance, this year we are scheduled to have nine major overhauls, so our expenses this year are going to be just around US$8M. But come next year when we have 13 major overhauls, our expenses are going to be a little higher than that,” Fraser further explained.
Questioned as to whether there was any need for the Government to inject funds into the company during its initial operation following the exit of Wärtsilä, Fraser responded in the negative.

NO SUBVENTION
He said based on the company’s current financial outlook, there will be no need for government subventions, since the company has the ability to meet all of its operational needs.
“We are self-sufficient, and there is no need for any injection from the State,” the CEO stated.

He further added that “in the current arrangement, GPL owns the four power plants” located at Kingston, Vreed-en-Hoop and Garden of Eden, and PPDI manages the operations and maintenance of these plants.
“They pay a rate which is essentially tied to the amount of megawatts we produce… and the revenue generated is used to run the business. In that regard, there was no need for any start-up capital,” said Fraser.

PPDI has a staff size of 135 persons, 90 of whom are technical people. It is headed by a CEO followed by three Deputy CEOs – Finance and Accounting, Technical, Administration.
There are also five middle managers – one managing each of the four power plants and the fifth manager oversees the operations of the workshop. Additionally, each plant is staffed by four shifts of four persons.

EXPERIENCED STAFF
According to Fraser, his staff has the requisite experience needed to fulfil the mandate of the company, due to the simple fact that many of them played critical roles in building the local Wärtsilä operations.
“When Wärtsilä came to Guyana and signed a contract with GPL, they had no prior experience in operating and maintaining plants. Luckily from day one, the company in Guyana was always run by Guyanese, so that the experiences of operating and maintaining plants originated in Guyana. Guyanese did so well, so much so that some of us were transferred to the Caribbean and wider Latin America, some got even as far as Finland,” he explained.

Fraser, who prior to his appointment to the post of CEO of PPDI served as the head of the Wärtsilä Company in Guyana for eight years and nine years before that as head of finance for the same company. He has a total of 17 years of senior management experience under his belt, and is confident that his team will be able to deliver under his watch.
“So I have no doubt that the people who stayed with PPDI, who were in Wärtsilä’s employ have the capabilities, they have the experience and they still have the drive. So the answer to the question is yes, we have the technical capability.

“I am surrounded by an excellent team, a hard-working team with really good work ethics. We truly run a 24-hour operation so it is not beyond any of us to come to the plant at three in the morning to do what is required. So with a culture like that it is less pressure on me personally, because everyone in the organisation understands and appreciates their function,” Fraser added.
PPDI is overlooked by a board chaired by Mark Bender.