The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent QC yesterday pledged to investigate “the rhyme and reason” behind the Grand Bahama Power Company buyout, and urged: “Let there be light.”

Fred Smith QC, the Callenders & Co attorney and partner, who is himself a shareholder in ICD Utilities, told Tribune Business he felt Bahamian investors were being “kept in the dark” on the rationale for buying out their holdings.

Emera, the Canadian utility that owns 80.37 per cent of GB Power, is offering to acquire the minority equity interest held by Bahamian shareholders in a near-$35 million deal that would potentially transform Grand Bahama’s monopoly power provider into a 100 per cent foreign-owned company.

Mr Smith said he “dislikes the concept” of a totally foreign-owned utility provider, especially since GB Power’s annual financial statements will no longer have to be disclosed as a consequence of ICD Utilities de-listing from the Bahamas International Securities Exchange (BISX).

He added that the proposed buy-out of Bahamian shareholders was also contrary to the late Edward St George’s intentions, which were for local interests to retain a significant stake in GB Power via ICD Utilities.

“I am a shareholder in ICD Utiliies,” Mr Smith told Tribune Business, “and I do not understand the rationale for this supposed swap, which will result in the shareholders of ICD Utilities no longer having any shareholder rights in Grand Bahama Power Company as it is.

“Although I am not a direct shareholder in Grand Bahama Power Company, I have derivative rights through ICD Utilities. As such, Grand Bahama Power is still answerable to the shareholders of ICD Utilities, but I am concerned that this process will strip the shareholders of ICC Utilities of their derivative rights in Grand Bahama Power.”

Tribune Business yesterday reported that the terms of Emera’s offer would ultimately result in ICD Utilities’ dissolution and de-listing from BISX, with shareholders given the option of exchanging their holdings for depository receipts (DRs) issued by the Canadian utility.

However, ICD Utilities’ end will mean GB Power’s annual financial statements no longer have to be published since there is no local public shareholding. As a result, Bahamians will no longer be able to fully scrutinise the utility’s financial performance, something Mr Smith described as “unacceptable”.

“I don’t want Depository Receipts in Emera,” he added, arguing that there were better ways to achieve Emera’s objective of “streamlining” the corporate ownership structure for GB Power.

The Callenders & Co attorney argued that “the better way” would be for GB Power to instead issue shares directly to Bahamian investors in proportion to their existing ICD Utilities holdings.

This, Mr Smith said, would enable Emera to liquidate ICD Utilities while allowing Bahamian shareholders to have a direct equity stake in GB Power.

“I just don’t understand why there is this apparent rush to virtually deprive the shareholders of their rights, either directly or indirectly, in Grand Bahama Power,” he added.

“By this proposal, GB Power could become 100 per cent foreign-owned, and all Bahamians with shares in ICD Utilities will have no interest in their own power company in their own island. I just don’t like that concept.”

Mr Smith continued: “I am going to look into the rhyme and reason for this. As a minority shareholder in ICD Utilities, I am going to try to educate myself about what is going on here.

“I’d like to understand the benefits that Emera is achieving, and any negatives that may be suffered by the shareholders of ICD Utilities. What are we winning, and what are we losing?

“This just goes against the grain to me. As a shareholder, I feel like I’m being kept in the dark. Let there be light.”

Emera told Tribune Business that its offer was “a win-win for all involved”, enabling it to boost its investment in Grand Bahama while giving Bahamian shareholders three ‘exit route’ options that may generate increased investment value.

The Bahamian minority investors in ICD Utilities, the BISX-listed holding vehicle for a 50 per cent equity interest in GB Power, can accept a price of $8.85 per share for their holdings, representing a 26.25 per cent premium to the current $7.01 BISX price, and 33 per cent premium to the “24-month volume-weighted average price”.

Alternatively, they can trade their ICD Utilities shares for 0.913 Emera depository receipts, enabling them to switch their narrowly-focused investment in GB Power for an international stock with worldwide utility investments.

Four depository receipts will equal one Emera share, giving Bahamian investors exposure to the potential upside generated by the Canadian utility’s spread of assets in Canada and the Caribbean.

The third and final choice is to take a combination of cash and depository receipts (DRs), and capital markets sources have told Tribune Business that Emera’s offer represents good value for Bahamian investors.

Mr Smith, though, said the buy-out proposal was the opposite of the concept developed by Mr St George, the late Grand Bahama Port Authority (GBPA) co-chair, who had always wanted to maintain a Bahamian equity interest in GB Power.

Recalling the original structure, the QC added: “The concept was that Southern Electric was not supposed to be a majority shareholder in Grand Bahama Power, so that Grand Bahama Power would remain 50 per cent owned by a Bahamian entity with Bahamian shareholders.

“The concept was always that the shareholders of ICD Utilities would 10 per cent in dividends per annum. That has not happened for a long time.”

Ironically, Emera gained its GB Power foothold by acquiring Mr St George’s 50 per cent interest in ICD Utilities, which was sold by his wife to finance then family estate’s then-litigation with the Haywards over their GBPA interest.

Mr Smith questioned whether the Hayward and St George families would accept Emera’s offer if they still held ICD Utilities shares, and said the proposal also created public policy issues for the Minnis administration.

With the offer already approved by the Bahamas Investment Authority (BIA), Mr Smith added: “I would like the BIA to share with the Bahamian public the details of the rationale for this transaction.

“I just don’t understand it, and the Bahamian public - if they are going to be stripped of ownership in their own power company - should have a better explanation.

“Given that this is a government dedicated to transparency, accountability and public consultation, I urge them to fully educate the public about what is going on.”