(QCOSTARICA) The Instituto Costarricense de Electricidad (ICE), the electricity monopoly, state telecommunications company and a player in the Internet server market, closed last year with losses above ¢83 billion colones, partly caused by a strengthening of the U.S. dollar.
Most (64%) of the loss was in electricity and 36% in the field of telecommunications.
The institution has incurred debts outside the country and that debt is in dollars that gained in value vs. the colon. Also, reported La Nacion, ICE hid in its copious financial reports, the intense losses of RACSA, its internet subsidiary company which ICE has refused to consider closing down.
In January of 2014, the dollar opened the year at ¢508.58 and closed at ¢541.95 colones per dollar in December, a loss of 7.6% over the year. Jesus Orozco, chief of Grupo ICE’s corporate finances, hastened to assure customers that the debt would not affect them.
Nevertheless, ICE will pay 30% of its total in debts over five years, according to its own information. The main company plus ICE subsidiaries National Power and Light (CNFL), RACSA the Internet company, and Cable Vision comprise the debt, 85% of which is in dollars.
Both Fitch Ratings and Moody’s financial counselors cautioned investors in the past several months to treat ICE warily because of its high debt in dollars. “Its plan (ICE’s investment scheme) can weaken its financial profile,” cautioned Fitch in January.
But both rating agencies agree that the company sales of electricity, Internet access, mobile and fixed phone lines are solid and permit servicing of its debts. However, the Comptroller Generals office has warned that ICE income is not uniform, which can cause negative consequences down the line.
La Nacion pointed out that for the first time ICE combined its figures for its subsidiaries in the May report, presumably to disguise the fact that RACSA has been losing customers for its on line business. Although it is a public company, ICE is allowed to do so by 2008 legislation.
Orozco told stockholders and customer that “there is no risk.”
Article by iNews.co.cr
I note that the biggest part of the loss is through the cost of supplying electricity services, electric generation, etc. This loss can only be attributed to gross mismanagement of the utility. For a period in 2014, ICE was paying RECOPE to import a petroleum fuel grade to run its thermal generating plants, which was a considerably higher priced fuel grade than was necessary. Let’s start there with the evidence of mismanagement and go on from there, with exorbitant wage and benefits packages paid to the Directors and employees. The Independent Republic of ICE carries-on as it pleases, essentially not being accountable to any other Government Regulatory Authority for its expenditures. It is somewhat alarming that the electric utility in the Country in Central America with the highest cost of electricity can still establish such an enormous loss.
This story should be paired with the one about regulators considering lifting the cap on telecommunications to allow for free-market competition. My guess is that all of the players have been losing money since the market was opened to competition and that this has been part of their business plan from the start. While the CAFTA cheerleaders have been hugging each other over how great the opening of the market has been for consumers, the companies have just been biding their time eating temporary losses waiting to raise rates.