The Government of Grenada has secured significantย cost savings in the just concluded repurchase of shares in the Grenada Electricityย Services Limited (GRENLEC), as part of its settlement agreement with WRB Enterprises which brings to an end, the International Centre for the Settlement of Investment Disputesย (ICSID) arbitration case brought by the company.
Through the US $63 million settlement, which is US $12 million less than the arbitration award, Government has now regained control of the 50% shares sold to WRB in 1994. Inย addition, Government has also acquired the 11.6% shares which WRB purchased through an affiliate company and which was used to plough profits back into the hands ofย the company and its affiliates, rather than into critical ongoing capital investment to maintain and improve GRENLECโs generating capacity.
Government was forced into the buy-back position when WRB initiated legal proceedingsย in 2017 following the passage of laws by the Parliament of Grenada to liberalise theย electricity sector under a World Bank-funded OECS project. That project sought toย diversify Grenadaโs energy sector to include renewables, THUS enabling the country toย meet its international commitments to reduce harmful greenhouse gases and to reduceย the cost of electricity to support private sector development.
The legal action by WRB was grouded in a clause in the 1994 Share Purchaseย Agreement signed by the then National Democratic Congress (NDC) administration whichย provided the company with a monopoly on the generation and distribution of electricity, aย monopoly which also imposed restrictions on individuals and corporations seeking toย generate electricity for their own use.
The New National Party (NNP) administration found this to be untenable, hence theย decades-long battle to correct what it perceived to be a grave injustice for both individualย consumers and the business community.
According to the tribunalโs ruling in 2019, based on the 1994 Share Purchase Agreement,ย Government was expected to buy back the WRB shares at the price laid out in the formulaย in the Agreement which had no bearing on their fair value, and which worked out to beย about US$64 million, after WRB paid only EC$15 million for them. Inclusive of interest toย date, the award would be about US $75 million, a sum Government has been successfulย in negotiating downwards.
Government and WRB subsequently entered into negotiations under a Frameworkย Agreement which imposed confidentiality on the proceedings, barring both parties fromย issuing any public statement regarding the Award, the dispute that led to same, theย Framework, or any negotiations between them pursuant thereto.
A deadline of December 29, 2020 was set as the closing date for concluding theย settlement agreement and it was only on Monday, December 28, that WRB lawyersย released to the Government the important signed documents providing warranties andย releases protecting the government from all liabilities that may be associated withย ownership of the shares.
In keeping with the spirit of the Framework agreement, Government sought to issue aย joint statement with WRB but the company proceeded to issue its own press release onย the matter.
Having now acquired majority ownership of GRENLEC and with the need for seriousย investment looming to maintain the companyโs electricity generation and distributionย capacity, Government has already approached the World Bank and the Internationalย Renewable Energy Agency (IRENA) to procure the services of a world-classย management company to operate the utility, facilitate the divestment of the sharesย through public offering, and to advance the countryโs objectives towards greater use ofย renewable energy and achieving energy security, returned reliability, lower prices, andย greater access, including the provision of much-needed renewable energy poweredย streetlights across the country.
With the arbitration settled, Grenada can now move forward with the much-needed reformย of the electricity sector, which is a key element of its transformation agenda as outlinedย in the National Sustainable Development Plan 2020 โ 2035.
