The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light’s (BPL) relationship with its management company had almost completely broken down last night, with the latter yet to name a new chief executive to replace the terminated Pamela Hill.

Darnell Osborne, BPL’s chairman, told Tribune Business that PowerSecure was expected to name a replacement for Ms Hill before “the close of the business day”, but had failed to do so.

She denied that the Government and BPL Board’s relationship with PowerSecure was in meltdown, but acknowledged that its future depended on how the US utility operator responds to their demands.

These, as set out by Ms Osborne yesterday, require PowerSecure to fully reimburse BPL for the $1.9 million lost as a result of the much-publicised fraudulent cheque scheme. And the Board has also ordered the US operator to “cure all deficiencies and/or breaches” under its contract within a 30-day period that expires in mid-September.

Tribune Business sources yesterday said PowerSecure was “highly offended” by both the Board’s demands and seeming high-handed attitude towards it.

They described BPL’s management partner as having “lawyered up”, and seriously considering whether to exit a five-year operating agreement that provides a maximum $25 million payout.

PowerSecure was said to be especially dumbfounded that the Government and Board were seeking to hold it financially accountable for the vendor fraud scheme when it was the management company that had requested the Ernst & Young forensic audit, having detected that something was amiss.

And they also revealed that PowerSecure is questioning the legality of Ms Hill’s termination, believing that its Management Services Agreement (MSA) gives the BPL Board the ability to request a change - but not to fire - the chief executive.

This newspaper’s contacts queried whether the Minnis administration has considered what would happen if PowerSecure does indeed leave the Bahamas, as BPL would have no management/executive team to replace it and the stricken utility monopoly.

Ms Osborne, though, last night said the BPL Board was awaiting PowerSecure’s response to efforts to hold it accountable.

“We’re dealing with holding PowerSecure’s feet to the fire in terms of the contract they signed, and curing the breaches,” she told Tribune Business. “They have several deficiencies and breaches.”

Disclosing that the BPL Board was waiting for PowerSecure to name Ms Hill’s replacement, Ms Osborne added: “They were supposed to do so by the close of business today. We’re awaiting their response, and will take the necessary steps afterwards.”

Asked to describe the Board’s troubled relationship with PowerSecure, Ms Osborne told Tribune Business: “I would not refer to it as rocky, but that is entirely up to them.”

She declined to detail the nature of PowerSecure’s “deficiencies and breaches”, but confirmed that BPL’s management partner has until mid-September to rectify them to the Board’s satisfaction after its attorney issued a letter last week. 

“There are quite a few listed breaches,” Ms Osborne said. “They’re not anything surprising. They’re all in the Management Services Agreement. We’re acting based on the agreement we met in place.

“The listed breaches and deficiencies shouldn’t be a surprise to no one, especially PowerSecure, as this is what they agreed to with the former government and Board. It’s up to them to remedy them. At this stage, we’re acting as fiduciaries, holding them [PowerSecure] to account.”

The major concern for Bahamian businesses and households is whether BPL’s ‘turbulence at the top’ will further disrupt operations at the Bahamas’ already-challenged utility monopoly, and potentially lead to less reliability (more power outages) and increased energy costs.

Mrs Osborne yesterday moved to calm such fears, saying: “Rest assured this Board is working very hard on behalf of the Bahamian people. We just need their support that trusts the actions of the Board. We have a very capable team of two engineers, two accountants and a lawyer.”

PowerSecure, not surprisingly, has a completely different perspective on the situation. Tribune Business sources suggested it was questioning the legality of Ms Hill’s termination, believing its management contract only allows the Board to recommend to it that the chief executive be replaced - not to fire him/her outright.

“PowerSecure is lawyered up and fully intends to respond,” one contact, intimately familiar with developments, said on condition of anonymity. “They are taking this very seriously. They are highly offended over the way this has been handled.”

The US-based utility, now part of Southern Company, was said to be especially incensed by the Board’s demand that it refund the $1.9 million fraud loss given that it was itself, and the now-terminated Ms Hill personally, who called for the forensic audit that uncovered the scheme.

“It was part of them doing their job,” the source said. “They had their own questions, and called in the audit.”

Astrid Bodie, the Bahamas Electrical Workers Union (BEWU) general secretary, yesterday questioned why the BPL Board was demanding the $1.9 million from PowerSecure rather than hold those responsible accountable.

“Union officers met with the Board this morning, and the Board informed them they intended to go after PowerSecure for $1.9 million that went missing under their watch in the accounts department,” she told Tribune Business.

“The union wants to know how they can go after PowerSecure when they had no direct control over that money that went missing, and how can you not hold the managers accountable?”

Ms Bodie said all payment requests had to be accompanied by between five to 10 supporting documents before cheques were written, and authorisations given.

“We’re very sorry they terminated Ms Hill because she had a very good working relationship with the union,” she added. “She was very fair in the workplace, and a big breath of fresh air for the union when she came.”

Suggesting that the BPL Board’s public criticisms and demands could have fractured the relationship with PowerSecure beyond repair, another source queried whether Ms Hill’s termination was an attempt to force the management company out, too.

However, PowerSecure was said to be conscious that an immediate withdrawal from its management contract could be interpreted as a sign it was at fault - and that the Board’s alleged “breaches and deficiencies” claim is correct - when it firmly believes this is not the case.

“They could go the way of exiting, but there is reputational risk, and they want to be clear why they left - that it was not a question of performance,” the source said. “They feel they could be blamed for what has and has not happened under the PLP. They’ve been put in a tough spot.”

The former Christie administration rejected PowerSecure’s request for an increase in BPL’s base tariff rate, which would have boosted cash flow and ended its practice of selling electricity ‘below cost’ - freeing up funds for much-needed maintenance.

And the previous government’s failure to refinance the Bahamas Electricity Corporation’s (BEC) $650 million-plus in legacy debts and environmental liabilities via the promised Rate Reduction Bond (RRB) has also left PowerSecure and BPL’s hands tied financially.

Tribune Business also understands that PowerSecure believes it should have been awarded more than the $1.1 million ‘bonus’ it received for its first year, following the signing of its management contract in March 2016.

The company’s case is that it hit so-called ‘key performance indicators’, such as reliability, something that will likely be greeted with derision by many Bahamians. And it also feels it has not received proper compensation for upgrading Harbour Island’s generation assets.

“It’s an unfortunate turn of events,” one source told Tribune Business, speaking on condition of anonymity. “But what’s next? If PowerSecure leave, they [BPL] don’t have a leadership team in there. They don’t have the expertise in-house.”