The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s reform plans for the Bahamas Electricity Corporation (BEC) faced fresh questions yesterday, after it was revealed that its new management partner is to be acquired by Grand Bahama Power’s former owner in a $431 million deal.

Opposition politicians immediately queried whether the Christie administration had been aware, when it signed the BEC management contract with PowerSecure International on February 9, that a deal for Southern Company to acquire the latter would be announced less than three weeks later.

K P Turnquest, the FNM’s deputy leader, told Tribune Business that the Bahamian people needed “to understand” whether PowerSecure’s “disposition” towards the BEC management contract would change as a result of the transaction.

In particular, he questioned whether Southern Company would be “as engaged and motivated to ensure a successful turnaround” at BEC and its newly-created subsidiary, Bahamas Power & Light (BPL).

“It’s important for us to understand their [Southern’s] disposition towards BEC, and how this agreement will affect the plans for BEC going forward,” Mr Turnquest said, “including the level of investment and management oversight they’re prepared to put in.

“We need to understand what is their disposition to this contract, having had this experience of operating in the Bahamas and having looked at BEC before, if I’m not mistaken, are they going to be prepared to do the heavy lifting to turn BEC around?”

Southern Company will be inheriting an agreement that it did not negotiate and, given that the five-year management agreement guarantees PowerSecure a fee of just $2 million per year, the earning are relatively immaterial given its size.

Although offering a $10 million base or ‘floor’, the BEC management contract ‘caps’ the maximum possible payment to PowerSecure at $25 million.

Mr Turnquest agreed that it was “a relevant question” as to whether Southern Company would commit the necessary investment, resources and management oversight to the BEC contract.

While Southern Company’s greater scale and size might prove an advantage, it could equally consider walking away from - or trying to renegotiate - the BEC deal given the amount of work required and the compensation on offer.

While Southern Company could indeed view the BEC contract as too small to be worth bothering about, the appointment of its former vice-president of fuel procurement, Jeff Wallace, could also be interpreted as a sign of its commitment to BPL.

“It’s a minor part of their operation,” the FNM deputy leader said of Southern,” although it might have been a bigger deal for PowerSecure.

“The question is: Are they [Southern] going to be as engaged and motivated to see this project turn around and be successful, and at what cost to the Bahamian people.”

Tribune Business attempted to gain answers to these questions yesterday, but to no avail.

Deputy Prime Minister Philip Davis, who has ministerial responsibility for BEC, did not respond to the detailed questions sent to both his personal and government e-mail addresses.

And PowerSecure’s chief spokesman promised to send a reply to Tribune Business’s queries once he had consulted with colleagues, but nothing was received before press time last night.

One Cabinet minister, speaking on condition of anonymity, told Tribune Business yesterday that they had been unaware of the impending PowerSecure merger/acquisition.

However, they swiftly qualified this statement by acknowledging they had not been involved in the negotiations with PowerSecure or the wider BEC and energy industry reforms.

Mr Turnquest, meanwhile, asked whether the PowerSecure transaction was ‘another Baha Mar’, where the Government was seemingly ‘kept in the dark’ over the project’s construction woes by the Chinese contractor.

“The Government should have been aware [of the Southern deal],” the east Grand Bahama MP added. “It’s material issue or item that should have been considered.

“If they did know, the question has to be asked why they [the Government] did not mention it when presenting the deal to the Bahamian people. This is a material announcement. The whole thing about transparency comes to mind.”

Mr Turnquest also pointed out that Southern Company, via its former subsidiary Southern Energy (later renamed Mirant) did not have entirely happy memories of its time as majority owner of Grand Bahama Power Company.

“Southern has been in the country before, so I’m sure they’re aware of some of the challenges of operating in this environment, which should work to the benefit of BPL,” he told Tribune Business.

“But they did exit the market, and the record would reflect that they didn’t make that many upgrades to the assets here.”

Branville McCartney, the Democratic National Alliance’s (DNA) leader, yesterday questioned whether the Management Agreement between the Government and PowerSecure provided for a change in the latter’s ownership.

And, if it did, whether this required Government approval or set in motion some other process.

“It is curious that just a few weeks ago, less than three weeks ago, that the agreement was signed with PowerSecure,” Mr McCartney told Tribune Business.

“The question is whether or not the Government was aware, when it made this agreement with PowerSecure, whether or not they knew it was in the process of being acquired by another company.”

Calling on the Deputy Prime Minister to provide answers, Mr McCartney added: “I would be very interested to see the contract that the Government has with PowerSecure, because the question would be whether it speaks to PowerSecure being taken over by another company.

“What does that do to the contract signed with the Government? The contract the Government has is with PowerSecure, not the new entity. Does the contract with PowerSecure come to an end because of this new entity? What is the legal position now there is a new entity that has bought or acquired PowerSecure?“

“We want to know that as Bahamians,” Mr McCartney added, “because we don’t get to see the contracts agreed on behalf of the Bahamian people.

“There are some questions to be asked, and if the new company is controlling it, what does that say to the employees of BEC? There are a lot of questions up in the air. They are very real questions that the Government needs to answer.”

PowerSecure will function as a subsidiary of the Southern Company once the deal is completed.

The acquisition of PowerSecure, which awaits approval by the company’s shareholders and US regulators, is scheduled to be completed by the end of the 2016 second quarter.