GEBE looks beyond cost cutting measures to the future
PHILIPSBURG – Utilities company GEBE is looking for a new insurance broker after it found out that its pre-Irma insurance covered damages caused by hail and snow but not damages caused by wind speed, the company’s chief Financial Officer, Iris Arrindell told a stunned parliamentary central committee on Tuesday afternoon.
In spite of this rather awkward revelation, Gebe’s management team – consisting next to Arrindell of Chief Executive Officer Kendrick Chittick and Chief Operation Officer Veronica Jansen-Webster – received little criticism from parliamentarians who showered the managers and Vromi-minister Miklos Giterson with questions (see related story). The meeting will continue in the week of February 18 when parliamentarians will receive answers to their questions.
The presentation of CFO Arrindell offered a candid insight into the state of affairs at Gebe. Hurricane Irma had a devastating effect on Gebe’s revenue stream. Income from electricity dropped from 149.5 million guilders in 2015 to 128.1 million in 2017 – a loss of more than 20 million guilders. Revenue from water distribution went up from 36.1 million in 2015 to 39.7 in 2017. Up to November 2018 Gebe collected 108.9 million in electricity revenue and 34.1 million from water distribution. These numbers suggest totals for the year 118.8 and 37.3 million respectively, or a drop in combined revenue compared to 2017 of another 10.6 million guilders.
The number of residential customers remained stable, but the number of commercial clients – among them hotels – dropped by 34 (for electricity) and 16 (for water).
Arrindell said that the company took several measures to keep it afloat: a hiring freeze, a cut in training programs and a request to the shareholder for the deferment of concession fees and dividend payments. Compared to 2016 (173.9 million) sales and operating expenses dropped by 10.6 million to 163.3 million. In 2018, expenditures up to November stood at 154.4 million, suggesting a rise by around 5 million towards the end of the year.
The cash reserves dropped from 41.1 million in August 2017 to 33.3 million in January 2018 and 29.9 million in January 2019. Gebe still booked a 1.8 million guilders profit in 2017, but its losses in 2018 up to November amount to 3.5 million.
With 37 percent, labor represents the major part of Gebe’s fixed costs at 30.5 million a year. Other expenditures concern material (9.9 million), maintenance (10.5 million), general expenditures (18.7 million) and depreciation (13.8 million).
The management team wants to renegotiate its contract with water production company Seven Seas, change its pension scheme and negotiate Dutch funding for its investment and operating needs. The team also intends to discuss future dividend payments and concession fees with its shareholder, the government.
In 2017 Gebe’s DSCR (debt service coverage ration) was 2.17, compared to 1.50 in 2016. Arrindell did not mention the ratio for 2018. A DSCR of 1 means that a company is able to service all of its debts and its operating expenditures. A DSCR below 1 could put a company in default.
On the list of things to do for the near future, cost cutting is number one. But Gebe is also looking beyond its current troubles and wants to secure financing for capital expenditures. Among the plans are the realization of a 4 MegaWatt solar park along the Great Salt Pond, the purchase of a dual fuel engine, execution of the smart city concept, restoring street lighting and updating this infrastructure with LEDs, the construction of a new main office building, putting the complete network underground (3 percent of high voltage cabling and 15 percent of low voltage cabling are still above ground), and rebuilding water tanks. Currently only seven of the pre-Irma 15 water tanks are operational.
###
Related article:
MP Richardson suggests new company for renewable energy
