MIRANT CORPORATION, the American energy giant which purchased 80 per cent of the shares of Jamaica Public Service Company (JPSCo) two years ago for US$200 million, is currently facing serious financial woes and is fighting to avoid formal bankruptcy or reorganisation under Chapter Eleven of the US Bankruptcy Code. A spokesman for Mirant claims that the trauma of the parent company will not affect JPSCo because it recently secured loan financing from the International Finance Corporation to complete the final stage of its 40-megawatt expansion programme in Jamaica.
This may be some consolation but we assume that the Jamaican government, by retaining 20 per cent of the shares of JPSCo, is entitled to representation on its board of directors and that these directors are monitoring the situation carefully.
Mirant's shares in JPSCo are part of its total assets and, in the absence of some contractual obligation not to dispose of them, they could be sold by Mirant to reduce its overall debt. In a formal bankruptcy, the JPSCo shares could be taken over by Mirant creditors. All the financial manoeuvring and perils facing Mirant will, in any case, be a huge management distraction, an atmosphere not conducive to focusing corporate attention on a relatively small subsidiary.
We have seen the parent company of another important Jamaican subsidiary go through a financial shake-up with repercussions in the local communications market. Cable and Wireless UK has had to pull out of the American market completely and is struggling to reinvent itself. It is in the throes of creating new corporate strategies which will undoubtedly affect Cable and Wireless Jamaica in its fight with Digicel for market share.
On the positive side, reorganisation under Chapter Eleven, if it comes to that, forestalls any action which general creditors and banks might wish to take to protect their interests and some large American corporations, availing themselves of this protection, have managed to restructure their finances and have emerged from Chapter Eleven with renewed corporate vigour.
If this happily turns out to be the case, perhaps Jamaica will be spared a plague of power cuts in the future. If it does not, the Jamaican government will have to consider what defensive steps it can take, including buying back the Mirant shares in JPSCo, to ensure a consistent and reliable supply of electricity to sustain economic growth.
