The background to recent developments at GPL

Dear Editor,

I write this letter to put another side, (my side, which the public might have been expecting) on the dissensions at the top of GPL, which were being disclosed and discussed in the media.

Great Tensions and dissensions have always been in play in the provision of our electricity. They may even be inevitable in our circumstances. What I think is most important, however, and what we should keep in focus before us as we chew on all these disclosures and furor is the great improvement that has been brought about in our electricity utility. It has progressed greatly since 1992, when it provided electricity an unpredictable 60% of the time to 75,000 customers, to today when it supplies electricity about 95% of the time to 175,000 customers.

Tensions There have always been great tensions and dissensions at the top of our electricity utility, amongst and between senior and executive managers , the board , the minister and the cabinet, caused in my judgment by the historical insufficiency in capital equipment and all the resources required; the high expectations inclusive of low costs and pricing which could not be met in our situation (prices In neighbouring Trinidad, Suriname and Venezuela could not be matched: they have their natural advantage that we do not yet have); the high non-technical or commercial losses, reduced presently but still high at about 16% which indicates that about one in six of our customers has arranged by one way or the other to pay little or nothing for the electricity he has consumed; and the many instances of obvious failings, shortcomings and misdemeanour s of utility employees at all levels. It can all be confounding, confusing and frustrating!

There have always been tensions between chairman and board on the one hand and CEO and management on the other, as each pressed from its own position and view for the best performance of the utility. Robin Singh as CEO before and after the period of privatization of GEC/GPL was not reluctant to assert that subsidies and subventions to GPL were not subsidies to the company GPL itself, nor to its employees, but to the customers, the public at large. Additionally the onus was on the government as owner, to provide the equity investment for sustaining and progressing the utility. Such assertions through true would have jarred us at times.

Appraisal Towards the end of 2014 the board did come to me with the failing grade assessment of the CEO Bharat Dindyal. I conceded to the board that there was nothing factual which I could fault in their assessment but with the projects almost completed at that time, let’s look back and see where things could realistically have been done differently and better.

In my judgment the overrun in cost and time of the two major projects were indicative primarily of the limitations of our envisaging and projections at the start of the projects.There had not been in my view, any wasting of money or time: if we had the knowledge and experience we now have, the projections would have been closer to how things turned out.

With respect to the transmission upgrade project, it had been specified in the bidding document that the winning bidder would review and refine our original broad specifications and put recommendations for enhancement.The contractor had put proposals for enhancement entailing a cost increase from just over US$30 million to about US$40 million which were considered by the GPL Board and management, recommended to and approved by cabinet. We received value more then commensurate with the increased expenditure.

With respect to the Vreed-en-Hoop generating station, when we arrived at the decision to have the power station built, we wanted and needed to have it built in a hurry. The first estimates and projections to start the project moving were based on best judgment before soil testing and detailed foundation design. As it turned out the soil conditions at Vreed-en-Hoop were much more demanding than what we had found at Kingston. With delays growing, owing to the slow delivery of the longer wooden piles required, Wartsila was asked about substituting concrete piles for wooden piles. Wartsila replied that the whole foundation would need to be redesigned. There could be no substituting of wooden piles with concrete piles.

Concerning the adverse comparisons of outsourced and in-house performance, these comparisons are seldom ‘on all fours.’ We would need to give some thought to the causes of the differences.

I acknowledged the frustration all around as each side sought to better the overall performance of GPL. Such attempts however often exacerbated the dissensions. I recalled a year or two earlier that the board called on the CEO and management to return with a budget in which GPL would have in place all the equipment and other resources such that the management would have no excuses and could be held to attaining the performance standards set. That budget however when presented could not be funded and management was required to return with a fundable budget which was much like the first.

It was clear that the relationship between the CEO and the board was beyond mending; an orderly separation was to be contemplated. I set a period of six months to one year for a separation, both sides considering and developing options within the first six months which would be implemented any time during the second six months, hopefully at a time of mutual convenience.

CEO salary It may be recalled that on the privatization of GPL in late 1999, the core investing partner required that the top five posts of GPL be filled with their appointees so as to put their face on the company. Messrs Robin Singh and Bharat Dindyal the numbers one and two at GEC/GPL were let go and had to find their way as best they could.

When the core partner walked away from GPL about four years later (the partnership foundered on the non-realization of the rapid reduction in non-technical /commercial losses, the reduction of which was key in the financial sustainability of the business model), we called on Messrs Singh and Dindyal then heading electricity utilities in small islands in the Caribbean, to drop whatever they were doing. We committed to fully compensating them, matching and even bettering whatever they were then receiving as foreign North American nationals.

A few years ago I wrote the board affirming the North American compensation package of the CEO, which was particular to him. At the same time our not so long term target must be to fill the post of the CEO (and all other executive managers) with ‘Guyanese” receiving compensation packages which would be in line with the compensation packages of executives in other Guyanese companies, and well related to the compensation of the unionized employees in GPL. We had to get past the forced practice of having to pay whatever we had to pay, which payment would be particular to the individuals.

Loss reduction GPL needs ‒ and it is being constantly demanded of GPL ‒ to spare no effort to reduce non-technical/commercial losses. Those losses, now down to 16%, nonetheless indicate that at least one in six of GPL’s customers and a number of past and current employees of GPL are involved in stealing electricity. Responsible GPL personnel cannot but pursue suspicious persons and situations in the face of possibilities of error. The regular publication of losses in various geographical areas across GPL’s network appears to add useful area identification with additional pressures to end stealing.

Deputy CEO Operations Sometime in 2012, Mr Welch was introduced to me as a Guyanese who had studied at Harvard, had worked at major US companies and who was keen to contribute his expertise and experience in management to his country, specifically at GPL. Mr Welch although he had no utility experience, seemed to be just what GPL needed. He could be a great addition to the executive management level where there was a shortage of numbers and everyone seemed too much stuck in hands-on day-to-day work. I requested the Chairman to negotiate with Mr Welch with intent to hire him, seeking the best (lowest) acceptable compensation package.

The first appraisal of Mr Welch by the CEO was blistering. I ruled that it was too early to make such final determinations. Mr Welch should have more time to catch his feet.

Sometime subsequently, Mr Welch in focusing on loss reduction had raised with the Human Resources Manager the propriety and procedures of a high level appointment in the Loss Reduction Division. Not obtaining a response to his satisfaction he sent me a copy of his letter which I requested the board to investigate and report on .The board apparently in a reflex action, replied that the matter should not have been brought to my attention as yet. I replied that even so I wanted a response to the substance at issue. I learnt later that the appointment was reversed.

With this background, I can understand the strong feelings and passionate actions of this Deputy CEO as well as the CEO. It might have been too great a challenge for the Human Resources Manager to have arranged things to the sufficient satisfaction of the two parties and to have avoided that confrontation.

Deputy CEO Admin Early this year the board sought my approval to raise the pay of the Deputy CEO Admin to that of the Deputy CEO Operations saying that there might have been a promise to do so. I pointed to the fact that by all accounts the Deputy CEO Operations would be let go at his next appraisal and what would we do then? Reduce the pay? Up to the time of the ending of my mandate I did not approve the increase.

Board fees Our cabinet had been repeatedly resistant to generally raising board fees from where they were earlier pegged. Eventually, earlier this year, new increased levels were set, payable from the current date. The question of arrears was raised but to my knowledge remained open up to the time of the ending of my mandate.

Conclusion The supply of electricity in our country has long been full of many contentions and controversies. These tendencies became unconstrained in that long void after the declaration of the election results; my mandate being at an end in mid-May; the new responsible minister not being identified with certainty for some time; the board paralyzed; and the new government saying that it had no confidence in the person who was Chairman and would let him go as soon as they were finished with him.

CEO Dindyal was ready to separate out on June 30. I kept asking him to stay on for a smooth handover. I was not wrong in so asking. I call on all who have been chairmen and board members, CEOs, managers and indeed all employees of GPL during my mandate to celebrate the progress we achieved in the presence of all the contradictions, contentions and dissensions, within and without the utility. Furthermore, we have invested so much in GPL we cannot but continue rooting for its continued improvement and success!

Yours faithfully, Samuel A A Hinds Former Prime Minister Minister responsible for Energy and Electricity