The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Electricity Corporation (BEC) reform process is today a month behind schedule, with some bidders said to be complaining it “lacks transparency” and that they have literally been ‘left in the dark’.

The original August 13, 2013, tender document, a copy of which has been obtained by Tribune Business, says the Government is supposed to select the winning bidder(s) for the generation, and transmission and distribution, contracts by year-end.

This has yet to happen, with sources familiar with the situation telling this newspaper that bidders for both contracts have yet to be informed of their fate since submitting their pricing proposals at the beginning of this month.

“They’ve not heard anything. They’re just waiting,” one source told Tribune Business of the bidders. “This process has not been transparent. They’ve resigned themselves to just waiting.”

Another contact added: “They don’t understand the delay or get what the problem is.”

Tribune Business understands that the Government’s key advisers on the BEC restructuring, and energy sector liberalisation, processes - KPMG, DNV Kema and Hogan Lovells - were busy wading through some fairly comprehensive bid submissions in the first two weeks of the month.

But Simon Townend, the KPMG (Bahamas) partner and head of its corporate finance arm in the Caribbean, who is playing a key role on the Government’s behalf in managing the BEC reform process, could not be contacted for comment before press deadline last night.

Tribune Business understands that at least some of the bidders have been asked by the Government’s to submit more information, and given a deadline of end-January 2014 to respond.

There have also been suggestions that a bidder ‘shortlist’ might be published within the next two weeks, but the end-January deadline means that the initial BEC reform timetable may be sliding as much as two months behind schedule.

The initial BEC tender says January-February 2014 is when the Government, and winning generation and transmission and distribution bidders, are supposed to execute their respective contracts.

All the necessary permits and approvals from the relevant government agencies are supposed to be in hand by March 2014, with legislative and regulatory reform of the Bahamian energy sector accomplished the same month.

The ‘front end’ transition to the new bidders will start in April 2014, with the winning bidder(s) agreeing to be “bound by the terms of their proposals”.

The full take over of BEC’s ‘split’ operations, as per the original timetable, is supposed to happen in May.

Some six bidders - four generation, two transmission and distribution - qualified to enter the BEC ‘pricing round’. But it is not clear whether all these submitted offers.

While the BEC bidders have never publicly been disclosed, Tribune Business previously revealed that one bid on the transmission/distribution side included an all-Bahamian group, Northern Bahamas Utilities.

They were said to have partnered with one of two US electrical utilities, Carolinas-based Power Secure or Pike Electric Company, eventually choosing the latter.

However, Tribune Business was told that Pike Elected not to bid on the final day before ‘pricing bids’ were due. And sources close to Power Secure have expressed confidence that it is “the last man standing” on the transmission and distribution side.

On the generation side, one bidder is the Caribbean Power Partners consortium, headed by Texas-based Taylor Cheek and featuring Fluor Corporation and ProEnergy Services.

As revealed previously by Tribune Business, the tender documents show JVCo, or the part-privatised generation business, will be required to enter into a 20-25 year Power Purchase Agreement to sell electricity to the transmission and distribution (NewCo) entity it has just split from.

Yet the winning bidder for NewCo will, according to the tender, be given a much shorter management contract of 10 year. And, while it will have seats on NewCo’s Board, the Government is “retaining a majority of seats”.

This is despite the winning bidder having to “provide the financing/capital for performance improvement (both infrastructure and operational in nature”, and cover any costs associated with reorganising NewCo.

The transmission and distribution partner will also have to refinance the legacy BEC debt attached to NewCo without the support of any government guarantee.

When it came to the winning NewCo bidder’s management contract compensation, the tender document said “incentive payments and the sharing of cost savings” are among the options.