NewsWhore
08-05-2008, 03:40 PM
Fitch Ratings has published a special report today on the Dominican Republic electricity sector, according to BusinessWire. Fitch says that "with the sector teetering on the brink of financial distress, investors are again asking if the recently re-elected Fernandez administration now has the political will and conviction to fix the system."
The report points out that the stand-by agreement with the International Monetary Fund (IMF), which provided a framework for the sector to reach financial self-sustainability while providing a more efficient, reliable and cost conscious electric service, expired January 2008 and has yet to be renewed. "Unfortunately, little was achieved during the period the agreement was in place," it observes. The report indicates that so far, the re-elected government seems to be taking an approach that is likely to perpetuate the sector's instability, rather than to eliminate market distortions and enforce the new electricity law.
Meanwhile, Fitch points out that rolling blackouts and electricity shortages have again become a way of life for people in the Dominican Republic. Extremely high electricity losses, the vast majority from theft, and low collections from end users have plagued the sector and resulted in perpetual electricity shortages.
It stresses that although the country has more than sufficient generation capacity to meet total demand, the government's decision to cap electricity prices, tolerate theft by end users and give free electricity has resulted in insufficient funds for state-owned electric distribution companies to cover their operating costs and pay private sector generators for contracted capacity.
The report, nevertheless does not mention other problems with the system - such as clientelism that has padded electricity organizations with unnecessary employees, privileged contracts for purchasing of fuel supplies and electricity, among other factors that would require political will for a change.
Fitch points out that the government has met the challenge of soaring oil prices by increasing subsidies, with taxpayers picking up the tab for clientelism and inefficiency within the system. Fitch advocates for an increase in tariffs, which are already twice as high as in competitor countries, such as Central America.
The full report titled "Dominican Republic Electricity: On the Edge of Darkness" is available on the Fitch Ratings web site www.fitchratings.com (http://www.fitchratings.com)
More... (http://www.dr1.com/index.html#3)
The report points out that the stand-by agreement with the International Monetary Fund (IMF), which provided a framework for the sector to reach financial self-sustainability while providing a more efficient, reliable and cost conscious electric service, expired January 2008 and has yet to be renewed. "Unfortunately, little was achieved during the period the agreement was in place," it observes. The report indicates that so far, the re-elected government seems to be taking an approach that is likely to perpetuate the sector's instability, rather than to eliminate market distortions and enforce the new electricity law.
Meanwhile, Fitch points out that rolling blackouts and electricity shortages have again become a way of life for people in the Dominican Republic. Extremely high electricity losses, the vast majority from theft, and low collections from end users have plagued the sector and resulted in perpetual electricity shortages.
It stresses that although the country has more than sufficient generation capacity to meet total demand, the government's decision to cap electricity prices, tolerate theft by end users and give free electricity has resulted in insufficient funds for state-owned electric distribution companies to cover their operating costs and pay private sector generators for contracted capacity.
The report, nevertheless does not mention other problems with the system - such as clientelism that has padded electricity organizations with unnecessary employees, privileged contracts for purchasing of fuel supplies and electricity, among other factors that would require political will for a change.
Fitch points out that the government has met the challenge of soaring oil prices by increasing subsidies, with taxpayers picking up the tab for clientelism and inefficiency within the system. Fitch advocates for an increase in tariffs, which are already twice as high as in competitor countries, such as Central America.
The full report titled "Dominican Republic Electricity: On the Edge of Darkness" is available on the Fitch Ratings web site www.fitchratings.com (http://www.fitchratings.com)
More... (http://www.dr1.com/index.html#3)