PetroCaribe Development Fund closure, Wigton IPO and lessons for Jamaica

THE GOVERNMENT’S decision to close the PetroCaribe Development Fund (PCDF) as of March 31, 2019, and the planned April initial public offering (IPO) for Wigton Windfarm Ltd are important markers in the evolution of Jamaica’s energy arrangements.

Of note is the fact that Wigton’s 63MW of clean energy capacity was largely financed by the PCDF, in three phases, for close to US$90 million. These loans were repaid by Wigton in 2018 to facilitate its pending divestment. This repayment to PCDF allowed additional financing for the Government of Jamaica via special dividend payments.

Minister Nigel Clarke recently disclosed that close to $20 billion in special distribution was paid by the PCDF to the Ministry of Finance to allow the major roadworks currently under way in the Corporate Area to proceed.

The strategy of the State, via the PCDF funding the development phase of renewable energy, which the private sector was unwilling to undertake without access to relatively inexpensive financing, was an important national undertaking at the time. The next step by the public-sector bodies of recouping their investment by privatisation is a worthy development strategy. It is hoped that the Government will continue to find useful public-private partnerships, where necessary, to continue the buildout of the renewable infrastructure of the country and so realise the national objective of 30 per cent of electricity-generating capacity by 2030. It would be to Jamaica’s benefit if some of the resources from the divestment of Wigton Windfarm were used for this purpose.

One of the little-known facts about the PetroCaribe energy arrangement between Hugo Chávez’s Venezuela and 18 other regional countries is that member states were encouraged to use the low-cost financing to expand their capacity for renewable energy and thus reduce their dependence on fossil fuel.

The very effective collaboration between PCDF and Wigton, over the last decade in exploiting the benefits of that energy arrangement, is commendable.

GRATITUDE TO VENEZUELA

The closing down of the PCDF, which Minister Clarke described at an awards function on March 22, 2019, as “a model for public-sector management,” is worthy of note. The PCDF, the finance minister stated, was “proof that Jamaicans can administer and manage huge assets in the public sector and do so efficiently”.

He drew attention to the fact that the PCDF “never had a bad loan, never had any scandal or misappropriation of funds”. This is significant, given what has been happening in other public bodies recently and the poor history of public-sector lending operations in Jamaica. The minister’s comment is a fitting tribute to the management of the PCDF, led by Dr Wesley Hughes, the board and staff. Another important footnote that Minister Clarke pointed to was the fact that the PetroCaribe arrangement was a ‘huge contributor to Jamaica’s survival and recovery, and for this, Jamaica will be forever in the debt of the people of Venezuela’.

With this subtle and gracious approach, Minister Clarke appears to separate himself from the less than grateful elements who have adopted a less-than-positive view of our relationship with Venezuela. The closure of the PCDF and the privatisation of the Wigton Windfarm should play well in Washington. For the United States administration, it will be one more nail in the coffin of the region’s current relationship with Venezuela.

For the International Monetary Fund, it will be seen as an advancement of the privatisation process and reduction in the number of state enterprises. In the case of Jamaica, the 14-year PetroCaribe arrangement and the management of the resources that flowed into the country can be listed as an overall success.