The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

and By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The private sector fears the Government may have compromised the integrity of the Bahamas Electricity Corporation (BEC) reform process by renewing contacts with groups that either did not participate or were rejected from the bidding at an early stage.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, questioned whether the BEC process had been re-opened after Prime Minister Perry Christie let slip last week that the Government had been talking to Emera and BISX-listed FOCOL Holdings again.

Grand Bahama Power Company’s majority shareholder had been part of a consortium, together with FOCOL and Wartsila, that had offered to construct a new power station for New Providence under a build/own/operate arrangement with BEC. Emera would have provided the management, FOCOL, the fuel, and Wartsila, the generators.

However, Franklyn Wilson, FOCOL’s chairman, previously confirmed to Tribune Business that the Emera/FOCOL group had elected not to participate in the formal BEC restructuring process, instead choosing to hold itself out as an independent power producer (IPP) to whichever bidder won.

Mr Bowe said the renewed talks between the Government and Emera/FOCOL had created confusion in the private sector, given that there had been no formal announcement confirming the BEC process was over.

Tribune Business contacts have suggested it is highly improper, and irregular, for the Government to be talking to non-participants and rejects from the BEC reform process without confirming it has ended - and no bidder deemed suitable.

This newspaper can also reveal that the Government has not confined itself to talking to Emera/FOCOL. For Tribune Business sources revealed that US-based Ludvig Electric, which was rejected from the BEC process at an early stage by the Government’s advisers, KPMG, was due to meet with Prime Minister Perry Christie and his team on Friday morning - ironically, just before the longest (and worst) BEC blackout in memory.

This newspaper’s sources said Ludvig’s Bahamian ‘point person’ is Grand Bahama-based Glen Lowe. They added that it was grossly unfair to those companies still ‘in’ the BEC process for the Government to be speaking to the likes of Ludvig and Emera/FOCOL without confirming that the process was over, and their bids deemed unsuitable.

Carolinas-based Power Secure was viewed as the only remaining player for what would be a ‘management contract’ to operate BEC, but it is understood to have heard nothing from the Government. As a result, it has moved on to assess other projects, and adopted the attitude: ‘Call us when you need us’.

“Put them out of their misery,” one source told Tribune Business in relation to the bidders. “Let’s end the process, move on and deal with the most challenging issue in this country - the cost of energy. Dealing with it would increase business and employment opportunities, and have an impact on crime.”

Tribune Business understands that KPMG is concentrating on putting together the ‘rate reduction’ bond, which would refinance BEC’s existing $450-$550 million debt and liabilities, while it waits for the Government to reach decision on how it will move the Corporation’s restructuring forward.

Sources familiar with the BEC process told Tribune Business that bidders have spent millions on doing due diligence, and putting together business plans, for the restructuring. And they suggested there were signs already that the Government and BEC were taking the ‘best bits’ from the bidders’ tender submissions, in a bid to develop and execute their own ‘solutions’.

Mr Bowe, meanwhile, said the private sector has been left wondering whether or not a firm has been selected. “It is unclear whether the agreement has been stalled by the Prime Minister because of some of the negative publicity that has arisen with Power Secure, or whether they are still in deliberation,” he added.

“Over the past two weeks it was very interesting for the private sector to see the Prime Minister make reference to Emera and the

FOCOL group, and the question would arise as to whether we are actually opening the bidding process again for entities who either did not participate originally or didn’t make it through to the qualifying round.

“That raises questions over the overall process. It is important to ensure that there is a fair and equitable process, and that it is

transparent with a proper audit trail, so that persons can understand the rationale so that, at the end of the day, there is no question over the validity of the process and the judgment that went into it, even if persons disagree with the choice.”

Mr Bowe added: “There needs to be clarity in terms of when things will transpire. It can no longer be imminent. The terms ‘imminent’ and ‘shortly’ are concerning because every day that passes and we are not able affect this situation, it has a cost to the business community.

“There is a tremendous amount of financial resources being tied up in energy costs that could be released into more productive areas of spending, and could lead to greater growth in our economy.

“These type of events highlight the need for the reform process to be expedited, and there needs to be clarity and communication from the Government as to where the process actually sits. Is there a chosen bidder, and others are now being allowed to enter a process that was originally deemed closed, or is there an open process, meaning no party had been selected and they have allowed others to enter from the perspective that they could more efficient?” he added.

“We want it to be an equitable process because our international reputation still remains, and while all of the players will have international connections we would not want to be seen as cherry picking or carrying out a process that would favour one party over the other. There is great desire to see energy security laid at the forefront so we can release tangible dollars into the community.”

Friday’s island-wide ‘black-out’ has underscored why the BEC reform process needs to be ‘expedited’, Mr Bowe said, urging the Government to clarify the status of the reform process and when it would be brought to a conclusion.

He added that for the private sector, the cost of energy and the instability of its supply was effectively a “double whammy” for

businesses.

Mr Bowe’s comments came on the heels of the second major island wide black-out in less than 10 months. A “fire in the trenches” at the Blue Hills power station caused a massive power outage across New Providence on Friday afternoon, leading to supply disruptions throughout the weekend for thousands of consumers.

“One of the most damaging aspects for business in recent items has been the cost of energy and instability in energy,” the BCCEC chairman said. “For businesses it comes as a double whammy. Electricity bills are extremely high due to the inefficiencies at BEC, and the cost of fuel is not helping the situation.

“Even after such high bills, businesses are suffering losses because of damaged equipment, and business interruptions because of an unstable energy supply. From that perspective, the overall reform process is designed effectively to cover those concerns by looking at the modernisation of the equipment being used and bringing the Corporation itself back to financial stability - where the price of fuel can actually be reduced.

“The Chamber and the private sector is very much in tune with what is taking place with the reform process. The principal criticism

is not so much the time that it has taken but the lack of communication and what I would call keeping the public abreast of the actual

progress.”

The Government has moved away from splitting BEC into separate generation and transmission and distribution (T&D) arms, as

initially proposed in August 2013, and is instead moving forward with a business model that mirrors the Nassau Airport Development Company’s (NAD) arrangement for Lynden Pindling International Airport’s (LPIA) management.

Under that arrangement, the Government will retain 100 per cent equity ownership of BEC even after the private sector manager is in place.