The Tribune

By NEIL HARTNELL

Tribune Business Editor

MORE than 60 per cent of the Bahamas Electricity Corporation's (BEC) 102,444 customers were over 90 days past due in paying their bills at the recession's peak, it has been revealed, with the monopoly power provider seeing a major decrease in its current solvency deficiency to $17.75 million at the end of its 2010 financial year.

BEC's annual report for the 12 months to end-September 2010, which was only signed off on by Deloitte & Touche (Bahamas) and the then-Board on September 18, 2011, highlights the dire financial position that has plagued the Corporation in recent times, with its cash flow deficit hitting $10.3 million for that period.

In the report, which has been obtained by Tribune Business, Michael Moss, the former BEC executive chairman, brought into stark relief the knock-on effect that the recession, through its impact on Bahamian businesses and households, was having on the Corporation's already-stretched finances, by stating simply: "More than 60 per cent of customers had arrears more than 90 days overdue."

In commercial banking parlance, that meant that close to two-thirds of BEC's customers were 'non-performing' in 2009 during the recession's peak. It also shows why, with some 5,000 customers disconnected, the Ingraham administration approved two payment 'relief' plans, with one initiated in the run-up to the 2012 general election.

BEC's annual report revealed that there was a slight improvement in the arrears position during 2010, with private sector receivables (from Bahamas-based businesses and households) more than 90 days past due down at 54 per cent, or $64.014 million of the total $117.713 million owed, compared to 60 per cent the previous year.

Noting that customer numbers increased by 1 per cent year-over-year to 102,444, the BEC report said: "This increase, coupled with continued poor paying habits of customers, resulted in an increase in gross receivables from the private sector of 29 per cent."

While bad debt expense fell from $14 million in 2009 to $9 million, the BEC annual report said that at end-September 2010, some $6.718 million owed by Bahamian businesses and households was 60 days-plus past due, and a further $15.802 million more than 30 days past due. Of $117.713 million in total receivables, just $31.179 million was current.

In previous interviews, Mr Moss has indicated that BEC's financial health has continued, albeit very modestly, to improve, with Hurricane Irene's estimated $5-$6 million in repair costs likely to wipe out much of 2011's projected profits.

In the his 2010 annual report message, the former executive chairman reiterated the Ingraham administration's theme that it was the first Christie government that was to blame for BEC's financial woes.

"The decrease in the basic electricity tariff in 2004 was the beginning of BEC's financial woes, as the cost to generate and distribute electricity exceeded the price charged to BEC's customers," Mr Moss wrote, explaining the need for a 5 per cent basic tariff increase.

That, together with the Government resuming payment for street-lighting, boosted BEC's 2010 revenues heading into 2011, with Mr Moss then taking a final swipe at what he termed as a top-line "hit hard by an ill-advised rat decrease six years earlier".

BEC posted a modest net $201,000 profit for its 2010 financial year, a major achievement when set against the previous year's $26.424 million net loss - an almost-$27 million turnaround. Losses of $2.916 million for 2006, and $21.225 million and $19.654 million for 2007 and 2008, respectively, also have to be taken into consideration.

Electricity sales increased by 21 per cent year-over-year in 2010, from $376 million to $457 million, but BEC noted that fuel costs - as a percentage of its total revenues - rose again to 61 per cent from 56 per cent.

And the auditors also noted that BEC's "current liabilities exceeded its current assets" by $17.75 million at year-end 2010, although that represented a massive improvement on the $264.584 million and $212.68 million current solvency deficiencies on the books at year-end 2009 and 2008, respectively.

"The Corporation experienced negative cash flow from operating activities of $26.301 million in the current year [2010], and continues to experience a recurring overall cash flow deficit of $10.3 million," the auditors' report said, noting that the latter had been $9.662 million in 2009.

To tackle this, the Government injected $30 million into BEC in September 2010 to enable it to pay a fuel bill to Shell, and also instructed the Corporation to convert a $4 million loan into equity and revenue "in the form of customer subsidy".

Accounts receivables owed to BEC by other government agencies and departments rose by 30 per cent to $47 million in 2010, but the latter was paid down by $18 million by August 2011.

Going forward, the new government will be faced with the maturity of a $211 million syndicated loan, owed to various Bahamas commercial banks, in early October 2011.