Sabrina N. Gordon, Business Reporter

Jamaica Public Service headquarters, Knutsford Boulevard, New Kingston. The electricity company says it is to decide on one of two options to recover costs related to Hurricane Dean. - File

A four-hundred-and-twenty million-dollar bill linked to hurricane recovery costs and added foreign exchange losses linked to the depreciating currency have pushed the Jamaica Public Service Company (JPS) into a loss position in its September quarter.

But the company, whose third quarter net loss was a heavy $198.9 million - erasing profits of $508 million recorded in the 2006 quarter - said Tuesday that it plans to recoup the storm-related spending resulting from Hurricane Dean, which hit in August.

How to recover expenses

Marubeni-owned JPS is still to determine, said communications director Winsome Callum, whether to dip into its more than US$7 million pool of insurance funds, or bill customers for the amount, either of which would require regulatory approval.

"The way the expenses will be recovered is not a decision to be taken by JPS, but by the Office of Utilities Regulation," said Callum, "and this decision is not made yet."

For the company's nine-month results, it narrowly eked $97 million of profit from an improved $37.8 billion of revenues, but the outcome was dismal when matched against the $1.7 billion of profit the power-generating company made within the same period a year ago.

Contributing factors

JPS pointed to hurricane charges, $433 million of foreign exchange losses, and an unexplained one-off charge of $515 million booked in its second quarter for 'non-recurrent expenses' as the items that helped to erase $1.6 billion or 94 per cent net earnings.

Its nine-month earnings per share dropped from $10.45 to 59 cents as a result of the bigger financing and operating expenses.

Operating profit also fell from $4.4 billion to $3 billion. That $3 billion would have been totally wiped out without a $190 million tax credit that helped to keep the company in the black in its nine-month earnings report, erasing $93.6 million of after-tax losses.

The forex losses were captured under net finance costs, which climbed from $1.9 billion to $2.2 billion for the nine-month period.

Increase in net financing costs were also associated with a $43 million fall in income generated from finance, and interest rate charges of $255 million driven by the refinancing of JPS' US$180 million debt stock.

Depreciation and amortisation expenses for the period were recorded at $2.4 billion, which represents an increase of 14 per cent or $300 million over the comparable period for 2006, due to capital expense incurred on the revaluation of specialised plants and equipment.

Increased revenue

Notwithstanding the loss made for the period under review, the company managed to increase operating revenue by seven per cent to $38.7 billion, compared to the $36 billion posted for the same period in 2006.

Energy sales within the nine months totalled 2,347 gwh, a mere 0.8 per cent improvement, while net generation rose 1.7 per cent to 3,063 gwh.

JPS said the growth in its cost of sales expenditure, which rose by $2.9 billion to $26.4 billion, was primarily the result of an additional $2.6 billion increase in its energy bill.

Operating expenses rose to $6.8 billion, resulting from a 15 per cent increase in maintenance expenses and a 13 per cent increase in selling, general and administration expenses (SG&A).

Maintenance expenses, the company said, were fuelled by work carried out on critical plants during the period while SG&A increases were mostly caused by increased staff costs.

sabrina.gordon@gleanerjm.com