INCREASING the electricity tariff by 17.27 per cent would enable Energy Fiji Ltd (EFL) to meet debt covenants imposed by lenders and provide comfort to the Fijian Government as the sovereign guarantor for some of EFL’s borrowings.
In its submission to the Fijian Competition and Consumer Commission, EFL said meeting debt covenants would also result in lenders not calling on securities such as debenture mortgage over the assets of EFL for loans that were secured via debenture mortgage, and this would enable EFL to maintain its gearing ratio below the maximum target level of 45 per cent when it borrowed annually to fund its Power Development Plan.
EFL said the proposed tariff increase would improve credit ratings in the international market if EFL had to borrow from offshore to fund major renewable energy projects in Fiji.
EFL also said this would assist the Reserve Bank of Fiji to achieve its target to reduce Fiji’s fuel import bills, improve Fiji’s foreign exchange reserve position and minimise the potential requirement for the Fijian Government to inject additional equity capital to EFL as a last resort in the event that EFL failed to pay loan repayments on time because of weak cash flows.
EFL added that raising the tariff would strengthen risk mitigation for natural disasters such as damaging cyclones, severe droughts and earthquakes.
The increase would also promote energy efficiency by sending the correct market signals and retain competitive electricity tariff rates in the Pacific Region, including Australia and New Zealand.
EFL said the increase in tariff would also ensure long-term, reliable and continuous power supply and eliminate outages.
