The Tribune

Leslie Miller has denied running his own bidding process for the Bahamas Electricity Corporation (BEC), even though one energy group says he encouraged them to submit a proposal after they were kicked out of the official tender.

BEC’s executive chairman initially told Tribune Business he had “no dealings” with the Bahamas Power Management (BPM) group, which told Prime Minister Perry Christie on March 6 how Mr Miller solicited them to submit a revised offer after they were eliminated from the official government-run process at the first hurdle.

BPM, a consortium featuring US and Bahamian entities, ultimately ended up dealing with Deputy Prime Minister Philip Davis due to what they described as “certain incongruities with Mr Miller”.

Mr Miller, the MP for Tall Pines, again denied BPM’s assertions, saying he had no knowledge of their claims. However, he then altered his story by conceding that BPM’s Bahamian partner, Glenn Lowe, president of Treasure Coast Development and Construction Company, had contacted him several times in relation to BEC.

BPM ultimately submitted its $850 million BEC proposal to Mr Davis in May 2014, Tribune Business can reveal, and followed this up by meeting the Deputy Prime Minister on December 4 last year “to discuss the new [BEC] strategy”.

The group’s three-year dealings with the Christie administration are set out in a March 6, 2015, letter to the Prime Minister that has been obtained by Tribune Business.

While some may consider its contents ‘academic’, given that the Government has finally selected PowerSecure International as BEC’s preferred manager, the letter raises serious questions and issues about what was going on inside the Christie administration as the need to solve the Corporation’s woes became more pressing.

In particular, many observers will question why senior government officials - in this case Mr Davis and Mr Miller - were meeting with a BEC suitor outside the confines of the official tender that was run by the KPMG accounting firm.

The obvious concern here is that such actions potentially threatened to compromise, and undermine, the integrity of the official KPMG process. It also sends negative signals to current and potential investors, who may be put off from participating in future public tenders in the Bahamas, due to concerns over how straightforward the Government will be in its dealings.

BPM’s letter, which was written seven to eight weeks before PowerSecure was finally confirmed as the preferred bidder, may also give some insight into why it took the Government 21 months to make a decision.

Mr Davis, who has ministerial responsibility for BEC, and headed the ministerial committee overseeing the KPMG process, could not be reached by phone for comment. An e-mail message, detailing the nature of the inquiry, was not returned.

However, Mr Davis is not alone in meeting with BEC ‘bidders’ from outside the process. For Prime Minister Perry Christie earlier this year admitted to meeting with FOCOL Holdings and Emera - who together decided not to enter the official tender - to discuss BEC prior to confirming PowerSecure’s selection.

This prompted Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s chairman, to express the exact same concerns regarding the integrity of the BEC reform process.

Tribune Business also exclusively revealed that Mr Christie, too, and other government officials met with the BPM group over BEC prior to the PowerSecure announcement.

While extremely cagey, both Mr Lowe and his US partner, Colorado-based Ludvik Electric, did confirm to Tribune Business that BPM had submitted a formal offer to the Government to take over and reform BEC.

Mr Miller, when contacted by Tribune Business, initially denied having any contact with BPM. “I had no dealings with them,” he said, adding that it was “not possible” that he reached out to the group - and invited them to re-bid - after they were thrown out of the KPMG process.

However, BEC’s executive chairman then admitted to being in contact with Mr Lowe. “He approached me a few times concerning this company, but that was a long time, almost a year, ago,” Mr Miller conceded.

He denied any knowledge of BPM’s “certain incongruities”, adding: “I’m not aware of what you speak.” Mr Miller asked for a copy of the letter, which Tribune Business sent to him via e-mail. He could not be reached for further comment after the document was sent.

The BPM letter to Mr Christie proposes an $850 million “capital improvements and operational maximisation programme” for BEC, and a pledge to reduce the latter’s power costs to $0.25 per kilowatt hour (KWh) within 120 days of an agreement with the Government.

Detailing Ludvik’s/Treasure Coast’s dealings with the Government, the March 6 letter says the two were initially part of a group called Tropic Energy Partners.

They first met with Mr Davis in 2012 to offer themselves as an independent power producer (IPP) on New Providence, via a 30 Mega Watt (MW) solar photovoltaic farm that would sell electricity to BEC at $0.21 per KWh - an almost-50 per cent discount to the Corporation’s current price.

The Deputy Prime Minister, though, told them that his “most urgent concerns were the operational deficiencies of BEC and the resulting financial drain on the Commonwealth”.

He referred Ludvik and Treasure Coast to Mr Miller, and in 2013 they proposed developing a new 125 MW power plant adjacent to BEC’s existing Clifton Pier station. This was billed as reducing BEC’s fuel costs by more than 40 per cent, due to the use of liquefied natural gas (LNG).

However, the Government then launched the official BEC reform process in August 2013. BPM’s letter alleges that its proposal was supposed to be assessed “outside” the KPMG-managed tender, without specifying who told them this.

“Ludvik Electric and Treasure Coast Development were advised that their proposal would be subject to an extra-procedural assessment outside the confines of the KPMG-administered scheme,” the letter to the Prime Minister alleges.

“However, two days before the official RFP deadline, Ludvik Electric and Treasure Coast were alerted that their proposal would in fact be subject to KPMG (Bahamas) analysis.

“Without having time to conduct the requisite due diligence and revise the proposal in order to meet the utility privatisation and legacy debt requirements, Ludvik Electric and Treasure Coast submitted the proposal in its original form, along with the $25,000 participation fee. The proposal was then disqualified by KPMG for failing to follow the RFP guidelines.”

BPM’s hopes were not to be dashed for long. “Following dismissal from the KPMG process, Chairman Miller contacted Ludvik Electric and Treasure Coast to gauge their interest in proposing once again through a different framework,” the letter says.

“Mr Miller conveyed to Ludvik Electric and Treasure Coast that the Commonwealth was now seeking the reorganisation of BEC as a public-private partnership (PPP), as well as the restructuring of BEC’s legacy debt with the removal of the Commonwealth’s sovereign guarantee therefrom.”

BPM told Mr Christie that “working parallel to the ongoing KPMG RFP process”, it hired Marsh & McLennan and National Standard Finance to develop a revised BEC offer.

“What emerged was a proposal that would have freed the Commonwealth of its sovereign guarantee on BEC’s debt, upgraded BEC’s legacy systems and brought new generation assets to the Commonwealth’s electricity sector,” BPM said.

“However, following certain incongruities with Mr Miller, Ludvik Electric and Treasure Coast, in their capacity as the sole members of BPM, submitted their proposal to DPM Davis in May 2014.”

The Government then altered course on BEC again, opting to retain 100 per cent ownership of the Corporation but bring in a private sector manager to operate it.

“Members from the BPM team met with DPM Davis in December 2014 to discuss the new strategy, and BPM subsequently supplemented the PPP proposal with a letter addressing the modification,” the March 6 letter told the Prime Minister.