Why corporatize FEA?

  • 8th May 2018
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Is it a guise, a first step towards the privatisation of the Fiji Electricity Authority
or Energy Fiji Ltd (its new name) and the sale of its shares as originally planned
by the government?

As we see it, FEA is doing well and there was no need for a structural change. It is a company owned by the people of Fiji, not the government, yet we have been allowed no say in the changes that have taken place.

The real owners of FEA are in fact its customers (the people) who have provided the capital for its operations and growth over the years since its establishment 50 years ago.

The company is fully financed and operated by revenue received from the people. Government has had no financial input in it. FEA does not even receive grants from the government except for the rural electrification programme.

“Why offer the public just 5% shares when the whole company is in fact owned by the people?” asked Labour Leader Mahendra Chaudhry.

“We have not seen any prospectus on this or any other details of the offer. Converting FEA from a statutory commercial entity to a company with shares that may be traded on the Stock Exchange opens the way for the privatisation of FEA. The offer of shares to the customers, is just the first step. People are not fooled by this,” Mr Chaudhry said.

We remember both the Prime Minister and the Economy Minister have publicly stated government’s intention to sell up to 49% of the FEA (or its successor company Energy Fiji Ltd) thus raising around $500m.

It is well known that government is cash strapped and intends to raise additional revenue to finance its escalating Budget deficits and loan repayment commitments.

FEA is a reliable and efficient supplier of electricity and its current available capacity of around 245 MW far exceeds the optimum demand of around 170MW. Thus, it carries a surplus capacity of around 75MW.

It is professionally well managed by our own local people and not dependent on expatriates as are some other government commercial entities. Government’s contribution to the acquisition of FEA’s assets can only be minimal except for underwriting its loans.

Mr Chaudhry expressed the fear that privatisation will eventually lead to higher electricity tariffs, both domestic and commercial:

“We know the private sector culture of maximising profits. While conceding the fact that electricity tariffs will remain under Commerce Commission surveillance, one should not altogether ignore the pressures that may be exerted on the authorities to grant tariff increases to the detriment of both the domestic as well as commercial/industrial customers.

Mr Chaudhry said since FEA was effectively owned by the people, all profits generated should go towards bringing down electricity rates, after putting a certain amount into the reserves.

He said priority should be given to raising the domestic lifeline threshold which was reduced from 250kWh to 130kWh in 2010, pushing close to a 100,000 poor and low income households into the high end domestic user bracket.

See also  Labour’s submission to the Parliamentary Standing Committee on the Bill to corporatise FEA at the following link:  http://www.flp.org.fj/fea-bill-abuse-of-parliamentary-process-says-labour