Wednesday, January 14, 2009

Fortis electricity debate in Belize- FORTIS threatens to sell out!


The head of FORTIS made no bones about, he wants to make money in the electricity business. Fair enough. The Belizean tv interviewers and he, went round and round in their questions and answers. FORTIS claim $10 million operating losses last year for BEL the distribution company and Stanley of FORTIS said he will no longer invest in the distribution company BEL under the PUC regime. He wants a return to a sort of guaranteed dividend system and that the Belize Government, present and past have not lived up to their agreement to establish some sort of system that will establish a guaranteed rate of return, or dividend. Belizeans under the new UDP government are trying to understand how big business works and were the money is. We are after all, a bunch of rural country bumpkins.
Stanley I think his name is; head of FORTIS the Canadian Electric Company running the pyramid of electrical companies, said BELIZE only represents 3% of their gross incomes in Canadian Fortis Company electrical supply, worldwide management services. I got the impression that the $3 billion investment in the country was enough now, that he would like to either get his way, or cash in his profits by selling the assets FORTIS now owns in Belize
There was considerable double talk and essentially he is angry that the profit that the companies make, are not being maintained. As Stanley explained it, they cannot keep up with depreciation costs. The cash profit flow is re-invested in expansion assets which are owned by FORTIS.
I listened to the pro and con and I was asking myself, why and what does he want out of Belize and where, if you take his talk at FACE VALUE, is their profit in FORTIS. The only way I could say, is by using an analogy of investing in a 300 apartment complex and how you make money off that. The loss is in the depreciation and the profit is the increase of the value of your property investment over time by appreciation. The cash flow you throw back into maintainance and write offs and you try to take some of the cash flow off, by some dividends and management costs. Long term investment though, you are holding and expanding the value of your assets, to resell some years down the road and that is where the real profit is. The money profit is the re-investment in the apartment complex, which over ten, or twenty years if you have maintained it and covered the depreciation amounts, from your rental cash flow, is your PROFIT, when you re-sell those assets. If done right, the apartment complex loses money over ten years, but since you use the money flow those apartments earn to maintain, while taking off your depreciation, you eventually have an investment that is FREE and CLEAR if you had borrowed loans to start off with, and now worth millions of dollars you can cash out when you sell. The apartment rents put back in the business, make you your profit when you re-sell over a long period of time.
In the case of the pyramid electrical companies in Belize, owned mostly by FORTIS, the value, or assets are now around $3 billion, I understand Stanley of FORTIS said. The thing is BELIZEANS have paid for it ALL. Except the original investment, which by now is covered, or written off, or fully depreciated. FORTIS just manage the overall investment. My understanding is; that he is fighting with the government right now, over the guaranteed rate of return, from which he takes off DIVIDENDS and the management fees? He may already have the management fees in the balance sheets, as an operating cost? I wouldn’t know about that. FORTIS he says are re-investing in the Belize Electricity system most of the BELIZEAN CUSTOMER CASH FLOW they are getting back and maintaining the value of the investment, in dams and distribution lines, or expanding these as re-investment ( which will be years ahead Fortis profit ) from the CASH FLOW supplied by the USERS which are the Belizean consumers, but while Belizean consumers are paying for EVERYTHING, through the Fortis management system, only FORTIS are accumulating ASSET WEALTH, because the electrical system they are expanding and building is the FORTIS profit eventually. If and when FORTIS decide to sell the operation to a world bidder. Stanley indicated he wanted to SELL out now and collect the $3 BILLION for FORTIS, the electrical operation in Belize, is now worth. Belizean consumers don’t own anything. We are just like renters in the apartment complex analogy. The electrical system of Belize, belongs to FORTIS the way it is setup.
Stanley of FORTIS is right in that he wants a properly regulated rate of return system and obviously there should be; a government to FORTIS dialogue. I don’t think either our PUC people, and certainly our CABINET people, understand the way BIG BUSINESS works. The profit for FORTIS, is actually in the building up of the assets value, by using consumers money. Fortis at some time can re-sell those growing valued assets to outside foreign world firms, or take the companies PUBLIC on the stock exchange and make money that way, with the assets they are acquiring by re-investing our consumers money wisely. I liked Stanley’s argument, that he wants to do it right, as to quality and service reliability, or NOT at all. I agree with that.
Belizeans apparently under the UDP and PUC are educating themselves on how this big business works! In the meantime, FORTIS is not covering depreciation cost losses, from Belizean consumers cash flows, which eventually reinvested turn into ASSET VALUE for Fortis. The rate of return and a system, or formula for calculating all this needs to be set in place.

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