Archive for January 13th, 2010

One for the skeptics that the electric crisis is not all Chavez’ Government fault

January 13, 2010

Since people are still not clear about whether rain has anything to do with the water problem, here is a six year proof that it is ALL the Chavez’ Government fault:

1) 2003 report by Veneconomia entitled “Guri at the edge of collapse”.

Some highlights:

a) The water level was at 246.71 meters, last report it is at 264 meters, 18 meters above that “critical” level that required no rationing. Why?

b) On an equivalent date (end of the year) in 2003, the water level was a few meters lower as can be seen in this plot published by Corpoelec on Xmas:

c) The report says that experts suggest starting a savings and rationing program in 2001, it is now 2009

d) The article quantifies the delay in investments up to that point: BEFORE THE OIL BOOM.

2) In October 2009, THREE MONTHS AGO,  Caracas Gringo said in no uncertain terms:

“It matters because officials at the Guri hydropower plant/dam operated by Corpoelec subsidiary Edelca report that turbine unit No.2 – which is currently shut down for maintenance – vibrates abnormally when in operation.

The Edelca officials also report that the concrete spillway that funnels water into turbine unit No. 2 has suffered structural damage (“perforations”) about 93 meters above the turbine unit, which make it increasingly difficult to control the volume/flow of water running through the power generation turbine.

However, turbine unit No.2 is only one of seven turbine units currently out of service at Guri, which has 20 turbine units with a combined power generation capacity of 10,000 MW. The other turbine units offline at present include Nos. 5, 6, 8, 10, 12 and 16.

Regional newspaper Correo del Caroni reports that turbine unit No.8 is almost ready to be restarted.

But Edelca officials at Guri complain that Corpoelec’s insistence that the repairs be accelerated is creating a dangerously unsafe situation in the turbine hall.

One attempt to restart turbine unit No. 8 earlier in October had to be suspended when the turbine’s rotation speed red-lined.

Turbine unit No. 16 has unspecified operational/technical problems which Edelca officials decline to disclose, even off the record. But a union official at Guri tells Caracas Gringo that turbine unit No. 16 is also, like turbine unit No. 2, a prime candidate for a catastrophic failure.

The other inoperative turbine units – Nos. 5, 6, 10 and 12 – are in the process of being maintained/repaired and soon will be restarted, according to Edelca and Corpoelec managers.

But union officials at Guri warn that these inoperative units also have unspecified problems which technicians are having problems repairing.”

So, don’t let Chavez fool you, it is not El Niño and it is not the IVth., it is the ignorance, incompetence and negligence of Chavez and his own Government! And its shows day after day

And by canceling the rationing plan imposed yesterday in Caracas and firingthe very improvised Minister of Electricity tonight, the Venezuelan President is showing, once again, the level of incompetence and improvisation in his administration.

(And today Caracas Gringo is out with another article on Guri that is not exactly very positive)

Zero Coupon dollar Bolibanana “auction”

January 13, 2010

The revolution never ceases to amaze. Today mid-morning, more like late morning, Reuters reported (The Central Bank leaked?) that the Central Bank was ready to sell US$ 50 million today as part of its effort to lower the swap rate. Not ten minutes later, the same source says they want the swap rate to go to Bs. 5 per dollar and the Central Bank will “auction” three-month zero coupon bonds.

So far, so good, the Government and the Central Bank have a new strategy, more transparent than the way they used to intervene the swap market. Sound very interesting. Except…

—The bond needs a market, buyers want currency, not bonds

—How can they do it this fast? They should announce it and then give people the chance to call clients and the like. A few days and this may work.

And then, as fast as you can say “Zero Coupon”, an announcement comes, you have to place your orders between 3 PM and 4 PM, those that “win” the auction will have to pay by 9 AM tomorrow and the bonds will only have custody at the Venezuelan Central Bank, no custody abroad. And…

And…in the best innovative Bolivarian style (Or is it Bolibanana?) the “auction” will be at a fixed price.

Say what?

Why even call it an auction if  this is the sale of a bond at a price and the Central Bank will decide using its Bolivarian random number generator who got the bond and who didn’t.

I know the Bolivarians hate markets, but this s somehow ridiculous.

And here I have to get a little “technical” and explain the bond. Since there is no auction, the price is like a nice full lunch in Paris “prix fixe”, the bonds will be sold at 116.25% at an exchange rate of Bs. 4.3 per dollar.

So, with the swap rate near Bs. 6, the Central Bank will sell you a bond with no interest, payable on March 14th. at Bs. 4.3 x 1.1625=Bs. 4.99875 per $. That is a difference of “only” 20%. (Note that we now have four rates of exchange, Bs. 2.6, Bs. 4.3, Bs. 4.99 and the swap rate)

That is, if you sold 1,000 dollars in the swap market at Bs. 6, you received Bs. 6,000 and you could turn around and order $ 1,200 of the new bond that in three months will give you $1,200. A nice 20% profit in US$ if you can hold on to the bond for three months.

But you had to have the Bs. in the Central Bank by 8 AM tomorrow, which not everyone could. Despite this, the Central Bank, I am told, received orders for US$ 500 million.

Thus, if the idea was like the Reuters source indicated, to lower the swap rate to Bs. 5, probably when they saw the size of the orders, they probably went to get some of these, because it looks like a very tall order to really lower the swap rate that much.

Unless of course, this was simply rigged to help a few make a buck.

Nahh! you say.

Well, here is the very transparent “result” of the “auction”. Yeap, they offered $50 million, they sold $50 million. And all at the “prixe fix” of 116.25 per $100. Who got it? Oh! That is confidential, someone definitely did. Not me, but I do want some.

It was indeed a Zero Coupon Bolibanana”auction”