The cash-strapped Grenada government of Prime Minister Dr. Keith Mitchell is showing signs of backing down from its previous confrontational position with U.S-based company, WRP Enterprises that controls majority shareholding interest in the island’s sole electricity company, Grenlec.
Prime Minister Mitchell is now calling for the owners of the company to sit down with government at the negotiating table and work out their differences.
“It’s not in WRB’s interest, it’s not in government’s interest to go fight internationally on this matter because a fight is going to cost both of us. It’s going to cost the government not just money, but also image; so, we don’t need that (fight) and we are not going to look for it and we know internationally, regionally all our friends on both sides urging compromise, so we will compromise”, PM Mitchell told reporters at a press conference in St. George’s.
His about turn seemingly brings to an end the hostile position that was often advanced by Public Utilities Minister, Gregory Bowen, a former General Manager of Grenlec who was dismissed from the job in the 1990’s.
The Prime Minister was addressing the Grenlec issue against the backdrop of an announcement from WRB that it was implementing the “buy back” clause in the sale agreement that mandates government to repurchase the company.
The deadline given to government to repurchase the Grenlec shares is now past due.
Dr. Mitchell told reporters that WRB is not being truthful in statements made about his government.
“It’s not true that we have stated our position. WRB has been written to by the Minister of Public Utilities (Gregory Bowen) through the Attorney General office about their request to government to buy the shares. As you know in any disputes and any request for cost of a particular buy out in any situation usually it’s a negotiating process and clearly what we did was write WRB saying you just stated what the buy out should be, it’s just the basis (to start the process”, he said.
“…Everything has basis because you can come and tell me if I am selling my house and my house is valued at 2 million dollars, just pay me because if we agreed that if you fail to do this then you must buy out…no no no it can’t happen that way. Hopefully, common sense will prevail and I believe we should and probably will”, he added.
Grenada Private Power Limited (GPP), which is associated with WRB had issued an advisory on March 22 for the Government of Grenada to repurchase its shares in Grenlec.
The shares had to be purchased based onthe privatisation agreement or Share Purchase Agreement (SPA) that the former Congress government of late Prime Minister Sir Nicholas Brathwaite had entered into with GPP and WRB in 1994 to purchase majority shares in the utility company.
This agreement requires government to repurchase the shares that the state had sold to GPP if government elects to take certain unilateral actions.
The government is obligated to repurchase the Grenlec shares held by GPP at a price calculated using the contractually mandated formula specified in schedule II of the Electricity Supply Act of 1994.
According to the release from Grenlec, the total amount, calculated according to the formula is EC $176.65 million and under the terms of the SPA, the government had 30 days from March 22nd within which to make the required share purchase payment to GPP.
PM Mitchell said that WRB was written to last week and asked to come to the table in the spirit of negotiations to get an idea as to what this basis is all about.
However, he was critical of WRB for the price tag placed on the table for the repurchase of the shares.
“You know what’s so interesting – when this company was sold to WRB, I remember I championed that this thing was a disaster for the country’s future and I said, it is strange we are selling something that has enormous future, connected to the future of the country.
“In other words, the goodwill of anything you (are) selling is not just the asset value, it is the potential earnings of that company. So, you should be talking about – yes, this is the asset value but it must be plus the goodwill and potential for earnings.
According to Prime Minister Mitchell, the goodwill factor was not taken into consideration back then in the sale price that WRB paid to take over control of Grenlec.
“Well you know something, now they (are) asking us to buy goodwill – goodwill is almost half the price. So, it has goodwill now when the company is selling but (when) we were selling, we never asked for goodwill…”, he said.
PM Mitchell re-stated his long held position that Grenada was taken for a ride in the deal that resulted in the sale of Grenlec.
“…I don’t blame WRB, if I was WRB I probably would have done the same thing. I am a businessman, I get a fool I’m gonna use him. You want to sell for nothing and I recognised that I can make a lot of money. So, now we are being asked to pay goodwill and I can’t blame them so we have to negotiate. We may have to pay some goodwill indeed unfortunately so, while we did not get goodwill before…” he said.
The 1990-95 National Democratic Congress (NDC) government of Sir Nicholas was forced to sell majority shares in Grenlec as part of a Structural Adjustment Program (SPA) that it was forced to introduce as the island was declared uncreditworthy.
The Washington-based International Monetary Fund (IMF) made demands for Grenlec to be privatised as the company had become a financial burden on the state.
The Congress regime was hard-pressed to secure loans to pump into the utility company to address a number of problems including frequent electrify black-outs under the Bowen-led management.