~ Irma damage totals NAf. 40 million ~
PHILIPSBURG–Water and light company GEBE painted a grim picture on Tuesday of its current and projected financial situation post-Hurricane Irma, and made clear that the company will eventually run out of funds if immediate belt-tightening measures are not taken.
The management team declined to indicate when funds are likely to be depleted if measures are not taken, noting that it has to inform Government as shareholder representative first.
The team told reporters at a press conference that GEBE had suffered an estimated NAf. 40 million in overall damage during the passing of Hurricane Irma in September last year. The company has spent roughly NAf. 6 million in various repair works thus far.
Chief Executive Officer (CEO) Kenrick Chittick, in a PowerPoint presentation delivered during the press conference, outlined GEBE’s preparations for the hurricane, gave an overview of the extent of the damage Irma had inflicted on the company, gave a snapshot of the company post-Irma, and outlined the measures taken following Irma.
He said the company had lost 30-40 per cent of its revenue with many of its major clients such as The Westin St. Maarten Dawn Beach Resort and Spa, Sonesta Maho Group, Divi Resorts and others being down since Irma, most of which he said had indicated that they will not be back online until late 2019.
Prior to Irma GEBE supplied about 55 megawatts of power to consumers. This plummeted to 21 megawatts by the end of September last year, 30 megawatts by October/November last year and now 35-36 megawatts.
In monetary terms, GEBE’s revenue stood at NAf. 15-18 million monthly before Irma and currently stands at NAf. 8-11 million monthly.
“Our financial status right now is tight,” Chief Operations Officer (COO) Iris Arrindell said. She assured that the company can currently cover all of its expenditures, but made clear that “we have to make additional cuts now” or the company will run in the red.
Arrindell said that despite the drop in revenue, the company still has its fixed expenses. A major concern is that GEBE will not meet the requirements of its debt service ratio to Pacific Life, with which GEBE has a loan. Currently the debt service ratio should stand at 1.5 per cent, but in the company’s post-Irma budget, even after projected cuts are taken into account, the debt service ratio would be at 0.6 per cent. Arrindell said this means that Pacific Life can “call in” its loan to GEBE “at any moment.”
Immediate measures
Chittick said some immediate cost-saving measures will be taken throughout GEBE, including a hiring freeze, cutting trainings, minimising and controlling overtime (which will be limited to emergency maintenance), slashing leisure expenses, slashing the advertising budget by 50 per cent, slashing consultancy, and deferring dividend and concession payments. Other measures will also be taken if necessary.
Chittick said GEBE had communicated its desire to defer dividend and concession payment to the former Government, but that Government had fallen soon afterward and the company is still awaiting a response from the current governing coalition. GEBE has a shareholders meeting with Government next week and this is one of the issues that will be raised.
GEBE has been “generous” in paying staffers bonuses and overtime in the past, but given the current situation, it cannot any longer. The cuts will extend to staffers, who will have to forgo bonuses and fringe benefits. Arrindell said the company is focusing right now on being able to maintain employees’ base salaries and the health and pension benefits.
She stressed that everyone in the company has to “be in this together” to keep GEBE afloat, noting that the cost-cutting is something in which everyone has to be involved.
“GEBE has a liquidity issue that we have to deal with,” Arrindell noted. “If we don’t take measures, next year we won’t be here. … It’s a conscious decision that we have to make.”
She said the company has been speaking to employees and being upfront with them about the company’s financial situation and has been communicating with the unions and trying to reach agreement with them. “We are still in talks with the union at the moment,” she said.
Two unions represent GEBE workers: St. Maarten Communications Union (SMCU) and the ASEWI Union. GEBE has a total of 252 workers. “We are all in this together. If we don’t make sacrifices then some will have to go home,” Arrindell said frankly.
Insurance
Chittick told The Daily Herald in an invited comment following the press conference that while some things for the company are insured, certain things such as the distribution network are too costly to be insured and are not “normal” items that are insured.
Also not insured are some of the older water tanks. Only seven newer ones of the 15 were insured, amongst several other things. He said also that while the company has received an advance from settlement of its insurance claim, what the company is likely to receive in its overall settlement will be a fraction of what it will cost to conduct repair works and restore the company to its pre-Irma status.
He said also that while the company has business interruption insurance, this is still pending. GEBE is insured by a combination of local and international companies.
In the meantime, GEBE is pursuing Dutch funding and is currently working with the World Bank on this. GEBE has submitted several projects for financing via this avenue.
Strides
On a positive note, Chittick said all of the company’s major equipment is currently 100 per cent functional, including its engines, boilers, separators and radiators, etc.
Regarding its distribution network, 97 per cent of the high voltage network is now underground (compared to 95 per cent that had been underground before Irma) and 89 per cent of its low voltage network is underground. Also, all downed cables were restored by January/February and all connections for residents and commercial sites have been completed.
All GEBE buildings that suffered damage during Irma, with the exception of the main office, which is beyond repair and use, are in operation, including the Distribution Building, Management Building, all five of the power plant buildings, GEBE’s warehouse, workshop and the lab.
Moving forward, GEBE will look to create temporary office spaces for its customer service. The company was also looking to make payment arrangements with its suppliers such as SOL and Seven Seas Water, etc., and while some of its requests have been met positively, Chittick said some have not, as some suppliers also suffered extensive damage and are unable to offer an arrangement.
He said a new main office building on Walter Nisbeth Road (Pondfill) would have to be reconstructed as the old one is beyond repair. Work will continue to repair the eight damaged water tanks and to repair damaged buildings such as at the power plant, cable yard, garage and distribution building, amongst others.
The underground cabling will continue and GEBE will be reviewing its hurricane preparedness plan to be even better prepared in the event of a future storm.
Source: The Daily Herald https://www.thedailyherald.sx/islands/75105-gebe-in-financial-straits-to-take-immediate-cost-cutting-measures
View comments
Hide comments