The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Bahamas Electricity Corporation (BEC) will finally be placed under private sector management this coming Monday, Tribune Business was told yesterday.

Paul Maynard, the Bahamas Electrical Workers Union’s (BEWU) president, said Deputy Prime Minster Philip Davis had informed the trade union that PowerSecure, the preferred bidder for the management contract, was set to assume operational control on February 1.

Mr Maynard told Tribune Business he was now caught in “a perfect storm”, seeking to minimise and lay-offs and redundancies as a result of PowerSecure’s takeover, while simultaneously seeking to assist the transition to the ‘new BEC’.

Speaking with Tribune Business, Mr Maynard said: “The Deputy Prime Minister informed us that PowerSecure is taking over on Monday, February 1.

“I guess they [the new management company] will call us in when they are ready. The process will begin once they call us in. Once they know what we want, once we know what they want ,we’re down. You just have to wait and see, go with it.”

Mr Maynard has acknowledged repeatedly that lay-offs at BEC are likely and to be expected, although he expressed confidence that the union would achieve a satisfactory outcome.

“There is no question. Next year is election year. I’m in the perfect storm,” said Mr Maynard.

PowerSecure’s assumption of full managerial and operational control at BEC brings to an end the first stage of the Bahamian energy industry reform process.

Apart from ultimately selecting PowerSecure as the private sector management firm, with the Government retaining 100 per cent equity ownership of BEC, this phase has also resulted in reform of the sector’s regulatory and legal framework.

Besides arranging for the transfer of all BEC’s operating assets into its newly-formed subsidiary, Bahamas Power & Light (BPL), the reforms are also intended to liberalise the energy market and open it up to generation competition, with utility-scale renewable providers now able to sell their electricity to BPL.

But, as one stage closes, another has begun. PowerSecure now has to execute on its Business Plan and management agreement, and the Government’s demands that it ultimately reduce energy costs by between 30-40 per cent.

And BEC’s legacy debts and liabilities, estimated at a minimum $600 million, all have to be refinanced and taken off BPL’s ‘balance sheet’ by the proposed Rate Reduction Bond that will be issued to investors.

Tribune Business sources have revealed that the new BEC Board, via a committee headed by Deepak Bhatnagar, has been ‘sounding out’ Bahamian capital markets players to determine how much could be raised locally for the Rate Reduction Bond.

Mr Davis last year hinted at a $600 million issue, with $100 million raised in the Bahamas, but this newspaper’s contacts have suggested the BEC Board committee has been exploring whether this sum could be increased to $150 million.

Local investment banks and broker/dealers have been invited to bid on the placement agent contract, Tribune Business understands, with the BEC Board committee being advised that the Bahamian capital markets may be able to absorb $150 million if it is done in stages.

Tribune Business reported earlier this month that PowerSecure and the Government’s representatives, including the KPMG accounting firm and BEC/BPL Board, were still locked in negotiations over the former’s management contract.

While several versions of the 280-page business plan have been presented to the Board and Cabinet, the management contract has taken longer to pin down.

Tribune Business sources recently suggested one outstanding issue was PowerSecure’s desire to invest in renewable energy-related projects in the Bahamas, potentially making it an independent power producer (IPP) suppling electricity to BPL - the entity it is also managing.

This newspaper understands that PowerSecure sees such IPP projects as a significant business opportunity for it in the Bahamas.

The Government was thought to not be keen on such arrangements, while another potential obstacle is how BPL (and PowerSecure) treat politically-related delinquent accounts, including those of government agencies.

Tribune Business also revealed in early December how the Government and PowerSecure were divided on how they should address BEC’s legacy environmental liabilities in their relationship.

Sources with knowledge of the talks between the Government and the prospective BPL management partner, speaking on condition of anonymity, said then that the Christie administration wants PowerSecure to complete environmental studies of all BEC sites within six months of assuming managerial responsibility.

They added that this was an aggressive timeline, based on the number of sites - and amount of data - that had to be collected.

PowerSecure will also receive a maximum $5 million annual fee for managing operations at the ‘new BEC’.

Some $2 million of this sum is guaranteed, with the remaining $3 million contingent on the US energy services provider hitting a series of performance-related goals - such as reliability, efficiency and profitability.

PowerSecure signed a Transition Services Agreement (TSA) to take over the management and operations of BEC’s new operating subsidiary, BPL, on July 22.

   The Electricity Bill 2015, the Utilities and Competition Amendment Bill 2015 and the Electricity Rate Reduction Bond Bill 2015 was the legislative package that will enable reforms to the country’s energy sector.