The Tribune

The legacy debt of $450 million and more from BEC will keep Bahamians in the dark for a while, Richard Coulson says . . .

Hurricane Matthew played no favourites, and neither has Bahamas Power and Light (BPL).

From the flats of South Beach, yea unto the peak of Mount Fitzwilliam, darkness has reigned; no Almighty said “let there be light”.

On October 21, Government House ballroom was unlit. The handsome invites for the gala Celebrating Women International had to be scrapped, although dispatched by Governor General Dame Marguerite Pindling.

“Cross” might be a polite word for the eminent lady’s reaction. Even Queen Elizabeth II would have hard words for her prime minister if Buckingham Palace went dark for two weeks.

Unfortunately, the blame lies directly with Dame Marguerite’s own government, inherited directly from her charismatic late husband Sir Lynden. Since her ministers took office in May, 2012, we can easily review their record of abject failure in leading us to cheap, reliable electric power - a principal plank in their Charter for Governance election platform.

The August 13, 2013, issue of Bahamas Weekly provides the Prime Minister’s lengthy, grandiose statement of how energy supply would be reformed, as developed by his chosen National Energy Task Force (NETF) - members unnamed. Amid the flow of eloquent generalities and the standard platitudes about renewal energy (meeting 30 per cent of our total needs by 2030) several specific points can be found about reorganising the Bahamas Electricity Corporation (BEC).

Recognising that “fundamental realignment would be required”, BEC would be divided into two companies, one for transmission and distribution, another for generation. Although the government would retain a stake, other parties would be promptly invited to bid by sending out RFPs (requests for proposals), and initial public offerings (IPOs) would be launched locally. With KPMG Advisory Service on board as principal consultant, all would be wrapped up by 2013 year-end.

As usual with Mr Christie’s more ebullient announcements, his promises have proved illusory. There is still no government programme for wide generation by solar, wind or recyclable waste resources, and the projected reorganisation of BEC has been radically revised and downsized.

By late 2013, it was obvious that any acceptable RFPs were slow in coming, and questions to Minister of Works Philip “Brave” Davis were being met with evasive answers that the matter was still “under study”. Finally, on February 27, 2014, Mr Davis was quoted as saying “we may fall back on doing it ourselves … BEC may remain unified and not split up”, reversing all the earlier analysis and advice by KPMG and a technical advisory firm. For the remainder of 2014, there was no further hard news; then in May, 2015, government announced firmly that it would keep 100 per cent ownership of BEC and, for a “transitional” fee of $900,000, simply granted “management” to PowerSecure International, an American company recommended by the US secretary of commerce, no less. That was an unusual choice, since PowerSecure, although publicly listed on the New York Stock Exchange, was not itself an electric utility but a provider of specialty services to major utility companies.

Although PowerSecure was a successful, entrepreneurial firm founded by its CEO Sidney Hinton, it took until early February, 2016, for it to sign a five-year management service agreement with the government, providing that PowerSecure could earn as much as $5 million annually for five years. Then within three weeks, to Mr Christie’s evident surprise, PowerSecure announced that it had been bought by US utility giant The Southern Company (formerly the controlling shareholder of Freeport Power) for $431 million, giving a nice profit to its shareholders - including Mr Hinton. Clearly he had been negotiating this major deal during all the months he had been dickering with our government about BEC.

Meanwhile, government had incorporated a new company named Bahamas Power and Light, wholly owned by BEC and created (here I quote) “to allow BEC to split off its generation, transmission and distribution duties and prepare for ring-fencing the utility’s $450 million-plus legacy debt.”

In other words, BPL would become the operator of all aspects of our electric power business, leaving BEC as a corporate shell with nothing but debt. PowerSecure (now a Southern Co subsidiary) would actually manage BPL and install its senior executives under a Bahamian board of directors headed by banker Nathaniel Beneby. The first choice of managing director was a gentleman who resigned “for personal reasons” within three weeks. PowerSecure had to hide its embarrassment by quickly finding a replacement, which it did by going outside its ranks and recruiting Pamela Hill from her senior position with a major US company. She was officially named CEO of BPL effective May 2 this year.

I hope Ms Hill is a lady of stamina, as she has suffered a rocky road ever since. Beginning at her Chamber of Commerce breakfast introduction, she has been steadily heckled by feisty Leslie Miller, former BEC executive chairman, and union leaders. When she made rational proposals to increase rates for electricity consumers, she was immediately shot down by the government, fearing political consequences. Then she had to share the bIame for government’s failure to build foundations for the arrival of new generators.

In June she had to warn of continuing outages during summer months, raising the ire of consumers.

This month’s descent of Hurricane Matthew was her personal “perfect storm” as public wrath rose to new heights facing some 8,000 New Providence consumers still in the dark - “the worst hurricane response in our history”. In fact, her response seems exemplary. Her contact with Southern Co enabled the speedy arrival of a flotilla of bucket trucks, with drivers and repair equipment, which would still be tangled in red tape if handled by Mr Davis’ Ministry of Public Works. The catastrophic damage along our south coast resulted from a geographical peculiarity combined with uncontrolled property development, poor drainage systems and unenforced building codes, issues over which she has no control.

The hurricane should not be used to obscure the fundamental failings of our energy regime, which will continue even in the sunniest weather. The real difficulty lies in financial management. As Ms Hill herself has stated, BPL is short of current operating funds to improve service and to correct the shoddy maintenance that government, through BEC, has allowed to fester for many years. These problems are not resolved by simply slotting in the new company BPL underneath BEC. It’s hard to understand - I certainly cannot - the incestuous relationship between these two companies. If BPL is now the operating entity, why do consumers still get their bills headed by the BEC logo and turn to the BEC internet website to get information about billing, plus a lot of out-of date material about a previous board of directors? Googling BPL, one finds only a Facebook page with a bold pink announcement that BPL “Supports Breast Cancer” - nothing else except an address and telephone number.

When will BPL be able to produce its own corporate facts and financial statements, the latest one from BEC covering the year 2010?

Any improvement in service is hamstrung by BEC’s legacy debt of at least $450 million, which certainly cannot be funded by BPL from its own operations. Early this year government authorised a BEC $600 million “Rate Reduction Bond”, but current reports show little success to date in placing these securities, and the technical default of an outstanding $100 million BEC bond was recently announced.

Ms Hill should be given full latitude for squeezing operating efficiencies into profit for BPL and dividends up to BEC, but it’s hard to see her making substantive improvements and reducing rates in the face of that overhanging debt.

Regrettably, both washed-out South Beach residents and the Government House ballroom may have to endure more nights in the dark.

• Richard Coulson is a retired lawyer and investment banker born in Nassau and from a long line of Bahamians. He is a financial consultant and author of A Corkscrew Life - adventures of a travelling financier.