Business Governance

State utility firms running huge losses

State utility firms are operating at a loss, a parliamentary committee has heard, with one power company’s debt standing at around MVR1.6 billion (US$103 million).

Environment and energy minister Thoriq Ibrahim, as well as utility company bosses, were summoned to a government oversight committee session on Wednesday to answer questions on unequal prices between the capital and outer islands.

People from the islands has been complaining about higher electricity prices and discrimination since last year when the government cut electricity subsidies and revised tariffs.

The minister and utility bosses, presenting a united front, told the committee that the operating costs for providing the services to remote islands exceeded the income gained from these places, resulting in huge losses for all companies.

State Electric Company (STELCO) CEO Ahmed Zuhoor said the company’s debt had risen to MVR1.6 billion while the company suffers an annual loss of MVR100 million (US$6.5 million).

“If we are only looking at Malé, we are able to manage. But all other islands except islands in Kaafu atoll makes a loss.”

STELCO provides electricity to Malé and 32 other islands within the central atolls of Kaafu, Alif Alif, Alif Dhaal and Vaavu.

The minister said the government was forced to pay Fenaka MVR10 million (US$648,500) every month to offset losses.

“That’s also to keep their losses at a minimum. The company is running at a huge loss”, he added.

Fenaka, which provides electricity to the islands of the northern and southern atolls, was formed in 2012 by merging five regional utility companies set up during president Mohamed Nasheed’s administration.

Fenaka managing director Ahmed Shareef said the firm used the money for fuel supply and to repay loans.

Shareef said the company had acquired more than MVR500 million (US$32 million) as debt from the regional firms.

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