The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE uncertainty surrounding the $35 million GB Power buy-out is "not the way we want to end 2017 in the capital markets", investment bankers have told Tribune Business.

Top executives at both Royal Fidelity Capital Markets and CFAL, the country's' two largest brokerages, are urging the Minnis administration to clarify why it has delayed the final approvals for Emera's buy-out of the Bahamian minority shareholders in BISX-listed ICD Utilities.

While a 'shareholders' notice' published yesterday said the Government was seeking to complete its review of the transaction by "no later than January 31, 2018,", both investment houses said they continue to receive "daily calls" from ICD Utilities investors inquiring about the fate of the monies due to them.

Anthony Ferguson, CFAL's president, told Tribune Business that some shareholders would have made commitments, including Christmas spending, in anticipation of receiving a cash payout based on the previously-announced early December 2017 closing.

Suggesting that these ICD Utilities investors would now have "lost out", Mr Ferguson said: "People are continuing to call and look for their funds. We receive calls on an almost daily basis from investors seeking payment.

"Some people could lose on commitments they've made in the past. It's very disappointing. I hope whatever approval is necessary is forthcoming as soon as possible. It's really negative. For the capital markets, it's not the way we want to end 2017."

Emera, prior to obtaining approval from 96 per cent of minority shareholders for the buy-out, said it had received approval for the deal from the Bahamas Investment Authority (BIA), the agency that acts as secretariat to the Government's National Economic Council (NEC).

It also obtained 'approval in principle' from the Central Bank, and a 'no objection' letter from the Securities Commission, but the Government has now opted to take 'a second look' before granting Emera approval to become Grand Bahama Power Company's 100 per cent owner.

K P Turnquest, the Deputy Prime Minister, told Tribune Business previously that the Government was "concerned" that the GB Power buy-out - if approved - is contrary to its ambition of creating wealth and investment opportunities for Bahamians.

"It's fair to say we're concerned about releasing the ownership to a foreign entity because it's our stated intent to create opportunities for investments by Bahamians," Mr Turnquest said.

"To the extent these opportunities arise, we'd prefer to have Bahamians at least involved in the ownership on a widespread basis. Our wish is to see Bahamians involved in the ownership of a diverse portfolio of investments."

Allowing Emera to purchase 100 per cent of GB Power's share capital is also seemingly contrary to the Free National Movement's (FNM) 2017 election manifesto, where it promised to privatise state-owned Bahamas Power & Light (BPL) while ensuring that Bahamians retained majority ownership.

Carl Bethel QC, the Attorney General, subsequently told this newspaper that the Minnis administration wanted to be sure that approving the Emera purchase is "consistent" with previous policy decisions taken when the Canadian utility first bought into GB Power.

But Michael Anderson, RoyalFidelity Merchant Bank & Trust's president, told Tribune Business that the Government needed to provide more clarity on why it had decided to hold-up the buy-out.

He suggested that Emera would never have gone ahead with the transaction had it not received government approval, and questioned why it had attracted so much "attention" when the Canadian utility had bought-out its Barbados minority investors in a similar deal in 2015.

"I think there's a number of impatient investors," Mr Anderson said, "and nobody's quite sure why it's being held up. They [Emera] should never have been allowed to go through with the transaction unless it was fully approved.

"For the market itself, nobody's quite sure where it is and how long it's going to take, so it creates uncertainty... If they're going to hold it up, put it out why you're doing this, rather than leave it as an open-ended transaction.

"It's very unfortunate that whatever arm of government is now deciding to look at something else. Emera would never have gone ahead with this transaction, paying all the costs and getting all the votes, if it knew it would never get the approvals."

Mr Anderson said RoyalFidelity, too, was fielding calls from brokerage clients who hold ICD Utilities shares about the fate of the payment expected in exchange for their shares.

"It's the same transaction that was done in Barbados a couple of years ago," he added of the GB Power buy-out, " so why there should be so much attention here, I don't know.

"Companies around the world are owned by foreign entities, and GB Power, to all intents and purposes, is not run by the Bahamian shareholders but by Emera. Why they should not be able to hold 100 per cent, I have no idea."

Several observers have suggested that the delay in closing a transaction common in most developed countries is a potential 'black eye' for the Bahamian capital markets, and could also undermine foreign investor confidence in the security of their investments here.

Mr Anderson, though, suggested that the situation reflected more the vagaries of the Government's approval process. "I'm not sure about the capital markets as such, as they're beholden to what the Government wants to put in place," he told Tribune Business.

"The capital markets are fine. I think it's purely a Government approvals process that has not been followed properly. It's not so much a reflection of the capital markets, but a reflection of the Government approval process."

Mr Ferguson, meanwhile, took aim at assertions that Bahamian shareholders were being "forced" to sell by Emera, branding this as "factually incorrect".

Pointing out, as the Bahamian financial adviser to the transaction, that an overwhelming majority had voted in favour of the deal, the CFAL chief said those who wanted to retain their indirect equity interest were still able to do so.

He pointed out that, by exchanging ICD Utilities shares for Emera's Bahamian Depository Receipts (BDRs), minority investors would no longer solely be invested in a single monopoly utility that has not paid a dividend in seven years.

Mr Ferguson said Bahamian investors would enjoy "reduced risk", and have access to greater upside, by now becoming shareholders in Emera's Canadian, US and Caribbean operations as well as GB Power notwithstanding the 25 per cent Canadian 'withholding tax' on any dividends paid.

As for persons wanting to exit, he added that the $8.85 price per share - representing a 26 per cent premium to the pre-transaction share price - would provide liquidity for either new investments or dealing with personal economic challenges.