The Jamaica Public Service Company (JPS) will engage in over US$500 million worth of investments in order to modernise and make more efficient its operations here.

The investment will amount to more than half of the JPS’ total assets, CEO of the electricity company Damian Obiglio told journalists at a press conference held at the company’s headquarters yesterday.

Obiglio said this would translate into lower cost of electricity generation and lower costs to its customers.

In an overview of the company’s corporate strategy, Obiglio said among the things that JPS aims to do over the next five years is to improve the quality of its customer service and customer satisfaction, improve operational efficiency, reduce system losses and modernise its units. He said the company has already invested US$491 million since 2001 in the transmission and distribution network and added 160mw of generating capacity. The US$ 500 million investment is part of a competitive bid process which the company is undertaking to build out another generating plant.

JPS currently generates 68 per cent of the electricity power in Jamaica, the remainder being supplied to the company by smaller energy partners including Jamaica Energy Partners, Wighton Wind Farms and Jamaica Broilers.

However, with the investment in alternative energy sources,( including wind and hydro that are also a part of the modernisation process), Obiglio told Caribbean Business Report that the dependence on oil based energy should decrease in coming years and with it the cost of electricity to customers.

JPS’ total assets currently amount to US$811.318 million, while total debt stand at US$388.78 million. The US$500 million in loans will be accessed from multilateral lending institutions with various tenures and at very low rates. Obiglio said having more debt as a percentage of its assets, was one way for the regulators to ensure that the company make its rates cheaper to customers.

“All these improvements will have to translate into a tariff reduction. All these loans we sign up for will cost below eight per cent per year, which we can transfer to customers in lower rates,” Obiglio said.

It follows the target set by the regulatory body the Office of Utilities Regulation (OUR) which has mandated that JPS reduce the cost of electricity to its customers by 2.7 per cent year. The low cost loans which will then be used to facilitate more efficient operations overall, is one way of ensuring this can be done without damage to the company’s earnings.

Obiglio said the investment is earmarked to install 480mw of generating capacity by 2016 if the company is successful in its competitive bid with the OUR to build out another generating plant. He said JPS is spending ‘millions of dollars’ just to prepare the bid in a very competitive process.

“It is a very tough bid, a financial commitment that is very significant,” he said. He further added that acquiring the new assets will cost the company up to 70 per cent of the assets of the entire JPS. “That is how big this project is for Jamaica.”

While the demand for electricity has fallen since 2009, Obiglio said constant investments of US$50-US$60 million must be made each year just to satisfy the demand and ensure continuity of service.

“We have to do a lot of investing in different areas of the company so as to guarantee electricity generation,” Obiglio said.

In 2010, US$61.5 million of capital was invested in loss reduction, expansion and other routine capital expenditure. Obiglio said the continued upgrading work should see a reduction in average interruption to customers by 35 per cent over the next four years. Additionally, the transmission reliability programme will cost the company US$28.5 million between 2011 and 2014, while US$32.6 million will be spent in maintaining and improving distribution reliability by 2014, almost 50 per cent more than the previous budget, Obiglio declared. It is estimated that 98 per cent of Jamaicans have access to electricity.

In the meantime, Obiglio is repeating the call for customers to continue to conserve on electricity as the price of oil continues to rise. He said so far customers have been using electricity more efficiently since 2008 when rates increased dramatically. Whereas in 2008, consumption per household was approximately 172kwh, that figure declined to 164kwh in 2009, but saw a slight increase to 171 in 2010.