The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Plans to break the Bahamas Electricity Corporation (BEC) into two have been shelved for the moment, Tribune Business can reveal, with the Government pushing to conclude a deal with its preferred bidder before New Year.

Informed sources close to the process told this newspaper that the Government’s BEC reform plan is now effectively a ‘mirror image’ of the Nassau Airport Development Company (NAD) model that was pioneered to facilitate Lynden Pindling International Airport’s (LPIA) revitalisation.

BEC, and its existing generation and transmission/distribution assets, will be transferred to a new company, similar to how the Airport Authority’s assets were placed in NAD.

While the Government retains ownership of the assets (at least for the present), it will sign a management agreement with the winning bidder for it to operate the monopoly power provider - the same sort of arrangement that Vantage has at NAD/LPIA.

Tribune Business sources said that while the Government was now seeking a single private sector ‘manager’ for all of BEC’s operations, this would not prevent the winning bidder from ‘sub-contracting’ the management of certain parts to other companies.

“It’s supposed to be going to Cabinet very soon, within the next couple of weeks,” one source said. “The Ministerial Committee is pushing hard to have all this in place, ready to go, by January. They’re working assiduously to get to a final position.”

Tribune Business understands that the Government’s energy task force, headed by Deepak Bhatnagar and advised by KPMG and DNV Kema, has made initial recommendations to the Ministerial Committee, headed by deputy prime minister Philip Davis.

Negotiations are now being undertaken with the remaining bidders in an effort to agree terms and reach a final position.

The remaining bidders are thought to include Power Secure, China State Construction and, possibly, Caribbean player Inter-Energy.

Multiple Tribune Business sources have told this newspaper that Power Secure’s Bahamian ‘point man’ is former Colina Insurance president, James Campbell.

Mr Campbell, who was forced from his post following a bitter shareholder dispute within the-then Colina Financial Group, has kept a relatively low profile since he obtained $12.5 million for his stake in arbitration.

However, he has emerged in recent weeks as a member of the Government’s Cellular Liberalisation Task Force. Mr Campbell is understood to be working on Power Secure’s behalf with Mark Holcombe, a Bahamas-based investment banker.

Much remains to be done on the BEC reform process, which if completed and successful, could have a huge, positive economic impact and help offset the cost increase associated with Value-Added Tax (VAT).

A new Electricity Act is being drafted, and BEC’s existing assets will have to be transferred into a new company, requiring more legal work.

It is also unclear what will happen to any industrial agreement that the Bahamas Electrical Workers Union (BEWU) might sign with the Government, and whether it - and its terms - would also transfer over to the ‘new’ BEC entity.

Any agreement would be with the ‘old’ BEC, effectively rendering it invalid with the ‘new’ entity, and raising questions about whether the Government might, if it is, be negotiating any deal that would tie the winning bidder’s hands.

Tribune Business sources suggested that BEC’s existing pension fund, which has a multi-million dollar deficit and is financed solely by the Corporation, would be closed to new employees in the event of restructuring.

Existing employees would still be on that plan, but new ones will contribute a portion of their salaries to the new one, which will be of the defined contribution variety.

And the ‘hole’ in the existing plan will be filled by part of the proceeds from the proposed $450 million ‘rate reduction’ bond, which will refinance’s BEC’s debt and cover its environmental obligations.