Fiji Time: 6:05 PM on Tuesday 23 January

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Capital intensive

Manasa Kalouniviti
Friday, January 12, 2018

ELECTRICITY business is a highly capital intensive industry, says Fiji Electricity Authority (FEA) chief executive officer Hasmukh Patel.

"We have tried to invest substantially in the power generation, transmission and distribution sectors," he said.

Mr Patel and his team made submissions to the Standing Committee on Economic Affairs yesterday on the FEA's 2016 Annual Report.

"FEA's total asset value in 2010 was around $926 million and at the end of 2016, because we're talking about the 2016 Annual Report, the total asset value was around $1.224 billion.

"So you can see there has been a major increase in the total asset value over the last seven to eight years," Mr Patel said.

He said capital expenditure (CAPEX) was high and was mostly funded by long term loans and FEA's internal cash flows.

"In order to fund CAPEX from internal cash flows we must make at least $40m profit a year," he said.

He said in the next 10 years, they were envisaging a capex of about $2.4b in the power sector.

"This will be a huge challenge considering the current uniform tariff structure that is in place," he said.

Mr Patel said FEA's borrowings in 2016 was about $320m and had been high over the past seven years.

"Therefore it is important that FEA adopts prudent financial management to ensure loans are paid on time without defaulting and meeting the lenders' debt governance."

He said the majority of the loans were government guaranteed where FEA held the majority of Government's contingent liability.

"However, around $220m of the $320m loan has been refinanced through ANZ without a government guarantee. Now this loan is on FEA's balance sheet. We have already negotiated an interest rate and the refinancing is in place now without any government guarantee."

He said they've also put in place strict debt governance to ensure loans were paid on time.

The committee meeting was chaired by MP Lorna Eden with sitting members Aseri Radrodro, Viliame Gavoka and Dr Brij Lal.

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