JPS makes record profit from summer heat

Power utility Jamaica Public Service Company, JPS, made record nine-month profit totalling U$$47.2 million, which outperformed the previous year by one-quarter.

It reflects increased earnings from its new ventures and higher demand for electricity, due to the record summer heat induced by increased warming of the planet.

“A significant portion of the improved performance for the referenced nine months would have been as a result of the strong performances of our non-utility business segments or investments,” said JPS Chief Financial Officer Vernon Douglas, in response to Financial Gleaner queries.

“Notwithstanding, our utility business also grew. This is attributable mainly to warmer temperatures throughout 2023, which would have resulted in increased demand.”

Earth experienced its hottest summer on record this year and led to persons finding refuge within air-conditioned offices, stores or homes. In Jamaica, that translated to increased demand for electricity for cooling purposes.

JPS, however, doesn’t solely rely on utility sales for revenue, which hit US$788 million over January to September. The electricity provider also earns from its renewable energy installation subsidiary, Caribbean Blue Skies Energy Limited, and associate business South Jamaica Power Company.

About US$10 million, or 20 per cent of the profit, made by JPS this year came from non-core activity, which it listed as ‘other income’ and ‘share of profit from equity-accounted investee’.

For JPS, which is owned by Korean, Japanese and Jamaican interests, it is the third straight year of rising profit for the group that experienced a fall in earnings in 2020 due to pandemic-related economic shocks.

“The group has diversified investments in new businesses since 2016, which would have changed the historic shape and trajectory of its performance,” Douglas said.

Profit as a proportion of the US$598 million in capital held by JPS rose to an annualised 10.5 per cent, up from 9.3 per cent in 2022, 7.8 per cent in 2021, and 6.5 per cent in 2020. The ratio reflects the rate at which the business is growing and serves as a proxy for comparing its performance to the yield on other investments, such as government paper, bonds or stocks.

“Our business has navigated various challenges this year, but we have remained resilient. We have strategically adapted to market shifts, focusing on innovation and customer-centric approaches. Our performance reflects the broader economic landscape, and we’re confident in our long-term strategies to drive sustainable growth and value for our stakeholders,” said Douglas.

Overall, the rate of profit generation at the JPS group has increased 55 per cent since the pandemic. On average, the power company averaged US$47.5 million in annualised profit for the period spanning 2020 to 2023. That’s better than the US$30.3 million annual average for the 2016 to 2019 period.

Douglas downplayed the linkages between global oil price fluctuations on JPS’s current financial performance. The utility doesn’t make money from fluctuations in energy prices. It passes on the cost to customers without adding a margin, based on regulatory requirements.

Customer bills, however, would have experienced fluctuations largely arising from Russia’s invasion of Ukraine in 2022 as oil prices spiked to highs of US$122 a barrel in June of that year. Oil is currently hovering at US$81 a barrel, based on Brent crude prices, which Jamaica tracks.

“While electricity is not a known elastic good and service, generally speaking, lower fuel prices have at intervals shown some levels of correlation with electricity demand, as has been the case in 2023 versus 2022,” Douglas said.

steven.jackson@gleanerjm.com

JPS annual profit:

2023: US$63 million (annualised)

2022: US$54.4 million

2021: US$42.1 million

2020: US$31.1 million

2019: US$42.2 million