The state-owned Grenada Electricity Company (GRENLEC) is reporting an EC$19.35 million (One EC dollar=US$0.37 cents) profit before tax last year, coinciding with the government regaining majority ownership of the lone electricity company on the island.
In December 2020, the then-ruling Keith Mitchell administration re-purchased the majority of the shares because of the favorable tribunal ruling at the International Centre for Settlement of Investment Disputes (ICSID) to the US-based WRB Enterprises that had first acquired the majority shares in 1994.
The purchasing agreement provides for disputes between the majority owner and the government to be resolved through ICSID which was established in 1966 for legal dispute resolution and conciliation between international investors and states.
Legal proceedings were initiated in 2017 after the Grenada Parliament approved legislation in 2016 to liberalize the electricity sector. The purchasing agreement said any change to the law that impaired the value of GRENLEC’s assets could trigger a “repurchase event”.
GRENLEC held its first annual general meeting since the re-purchase last month and according to the annual report for 2021, the company reported a profitable year despite the social and economic challenges linked directly to the coronavirus (COVID-19) pandemic.
“Notwithstanding the challenges, the extraordinary efforts of our team members in 2021 realized a $19.35 million profit before tax, 11.91 percent lower than the EC$21.96 million achieved in 2020. There was an extraordinary item of EC$10.88 million for insurance refund related to an engine failure in 2020,” said the report.
“If one discounts the effect of this refund, the true profit on operations was EC$8.55 million, 61 percent lower than in 2020. This lower profit margin is attributable to higher operating costs, as well as a EC$5.5 million under-recovery on the cost of fuel. The low fuel cost recovery rate of 93.38 percent was the lowest on record,” wrote Dr. Shawn Charles, the then GRENLEC chairman.
“This fuel cost recovery rate is determined by the three-month rolling average used to calculate the fuel charge paid by customers. When fuel prices are increasing, customers are cushioned from sharp increases and our Company under-recovers the cost of fuel. During the year under review, there was a tremendous increase in fuel costs, which started to increase in January and continued through to year-end,” he reminded the shareholders.
“These fuel price increases, the associated lower fuel cost recovery rate, and the continued impact of COVID-19 meant lower earnings per share. At EC$0.78, your Company’s earnings per share (EPS), represented an eight percent decline on the eighty-five cents earned in 2020,” according to the chairman’s report.
“Nonetheless, your board maintained the same level of dividends as in 2020, with the total dividend paid of EC$0.52 in four quarterly installments of thirteen cents per share. Your shares listed on the Eastern Caribbean Securities Exchange (ECSE) traded at between EC$10.00 and EC$11.50 per share in 2021 and were listed at a price of EC$10.50 per share as of 15 August 2022,” the report said.
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