The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The prospective management partner for the Bahamas Electricity Corporation (BEC) believes it “matches up very well” with its needs, and told the Government: “You’ve picked a great team.”

Top PowerSecure International executives told a Wednesday conference call with Wall Street analysts that their focus on micro electricity grid development fitted well with a BEC infrastructure that was spread across 30 islands.

Sidney Hinton, PowerSecure’s president and chief executive, touted the company’s “significant capabilities” to first stabilise, then improve, what he described as BEC’s “rather unique situation”.

He added that the Bahamas was “struggling with high power costs and low grid reliability”, but warned that PowerSecure and the Government were “at the beginning stage” of determining their relationship and the BEC contracts terms.

“Some of you may have seen the announcement out of the Bahamas,” Mr Hinton said, in reference to the Government’s announcement last week that it had selected PowerSecure as the ‘preferred bidder’ for the BEC management contract.

“It’s an example of the depth of expertise that we’ve been blessed to build here in PowerSecure.

“The Bahamas is struggling with high power costs and low grid reliability. We were happy and blessed to be chosen by them [the Government] to manage the operations and oversight of Bahamas Electricity Corporation.”

Mr Hinton’s comments contained few specific details on what PowerSecure hoped to achieve with BEC, and the steps it would take to his these objectives, most probably because it has yet to finalise and sign the five-year management contract being offered by the Government.

“We’re at the beginning stages of that working [relationship], and we’re excited about it,” the PowerSecure chief said.

“They’re great people down there [in the Bahamas]. They do have significant challenges, and they’ve picked a great team, because we have significant capabilities to come in and help them.”

Mr Hinton later suggested that PowerSecure’s “forthright” approach to the BEC Request for Proposal (RFP), and abilities that best matched what the Government was looking for, helped to win it the bid.

Responding to an analyst’s question, he suggested that there were between three-five rival bids competing for the BEC contract “at different times”.

Asked why PowerSecure had triumphed, Mr Hinton replied: “I don’t want to put words in their [the Government’s] mouth, but [it’s] our depth of expertise, and we match up very well with generation and distribution situation over there on the island.

“They [BEC] basically have a tonne of micro grids down there as well, so our competencies and oversight really match up really nicely for their rather unique situation.”

The PowerSecure chief then added: “Yeah, I think they [the Government] liked that we’re very forthright, you know, even to the point where we’re just very direct in our answers.

“We didn’t want them to be pegged that they didn’t understand what they were getting.

“We’re very, very good in the utility world. We’re very, very good on the generation side, very good on the analytics. At the end of the day, they [the Government and its advisers] visited, they saw and they liked, and we made it through the process.”

Mr Hinton’s conference call remarks will probably do little, though, to answer many of the detailed questions that BEC’s two unions and the wider public have about its plans for transforming BEC.

The absence of firm details is understandable given that PowerSecure has yet to finalise the five-year management contract with the Government, and much remains to be done to conclude this.

Multiple Tribune Business sources who are close to the process yesterday said there was no guarantee that PowerSecure and the Government would be able to agree terms, given that the BEC reform tender dragged on for more than 20 months.

“There’s no contract, and the Government has not officially been engaged with PowerSecure for seven months,” one contact informed Tribune Business.

“A lot has changed in seven months. Things have changed in terms of renewable energy, and things will have changed in terms of its business plan” for BEC.

PowerSecure will now have to conduct further due diligence on BEC to ensure its business plan for the Corporation remains “valid”, the source told this newspaper.

They added that the two sides would effectively have to “completely restart this process from the ground up”, and said: “It’s going to be a challenge to get it doe.

“PowerSecure are not novices, and they’re not going to sign a bad deal for the sake of signing a bad deal.”

Tribune Business sources said a PowerSecure team, headed by Eric Dupont, its executive vice-president of finance and administration, would be in the Bahamas next week to kick-off negotiations.

They will meet with key government officials, including Deepak Bhatnagar, head of the Government’s energy task force, and Simon Wilson, deputy financial secretary at the Ministry of Finance. The Government’s financial advisers, the KPMG accounting firm, will also be present.

It is understood that Mr Hinton and other PowerSecure executives will follow the advance team to the Bahamas the following weeks. Meetings with the BEC unions and renewable energy providers are also planned.

Apart from PowerSecure’s financial remuneration, the two sides will also have to agree on specific terms governing its role and objectives at BEC.

Tribune Business was told that among PowerSecure’s concerns is whether it will have the flexibility, and necessary freedom from government/political interference, to take the decisions necessary for turning BEC around.

“The company is concerned that the expectations are high, and that people are expecting instant results,” one source said of PowerSecure. “The Government has sold this in that sort of way.”

Thus much more remains to be done than the Government’s initial release allowed for, and some observers are suspicious that - amid a period of rolling blackouts - it rushed out the PowerSecure announcement to merely give itself breathing space and relieve the growing public pressure.

Contacts close to the Government previously told Tribune Business that there was “still a long path to go down” to get BEC, a monopoly provider that is losing more than $20 million per year, to where it needs to be.

Tribune Business was told that Power Secure’s plan calls for “a substantial reduction” in the cost of electricity for Bahamian consumers, targeting a price in at least the $0.20 per kilowatt hour range - something that would represent anywhere from a 30-50 per cent reduction on BEC’s average tariff.

And, to deal with BEC’s supply reliability/outages woes, Power Secure is understood to be proposing to increase the Corporation’s generation capacity and install new equipment.

BEC will be restructured along the same lines as the Nassau Airport Development Company (NAD) model, with the Government retaining 100 per cent ownership and Power Secure acting as the manager.

Tribune Business understands that BEC will have a new Board comprised of new directors, while plans to restructure its legacy debt and other liabilities will run in parallel to Power Secure’s work.

The Government’s advisers, KPMG, have already received proposals for placing a ‘rate reduction bond’ from a variety of investment banks. The Christie administration will then have to “pull the trigger” on the winning bidder to initiate this process.

A revised Electricity Act, which makes the Utilities Regulation and Competition Authority (URCA) the sector’s regulator, is also in circulation.