The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent QC yesterday “guaranteed” he will launch a Supreme Court action to block the $35 million ‘buy-out’ of Grand Bahama Power Company’s minority Bahamian shareholders.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business he would be issuing Judicial Review and constitutional proceedings “very shortly” in a bid to overturn the Government approvals already granted to Emera for the transaction.

Mr Smith, who said he holds $300,000 worth of shares in ICD Utilities, the BISX-listed holding vehicle for a 50 per cent equity interest in GB Power, said he was “most vexed” by the failure of both the Canadian utility and Minnis administration to consult with the 19.63 per cent Bahamian investors prior to announcing/approving the transaction.

Emera, as a listed entity on Canada’s Toronto Stock Exchange, would likely have been prevented by public company disclosure rules from discussing the transaction with anybody - apart from the Government - prior to its formal unveiling.

Mr Smith, though, said he would seek to overturn the Government’s approvals on the grounds that the Bahamas Investment Authority (BIA) - the entity that granted them - does not exist in statute, and therefor has no basis in law.

He added that he was preparing a constitutional motion, too, on the grounds that the approvals and previous discussions between Emera, GB Power’s 80.37 per cent majority shareholder, and the Government had effectively deprived him of his “property rights” - his ICD Utilities shares.

In fact, Emera’s documents make clear that the ICD Utilities ‘buy out’ will only be consummated if a majority of minority, non-Emera investors vote in favour of it at a special and annual general meeting (AGM) on November 8. If the vote is favourable, then 75 per cent of ICD Utilities’ investors, including Emera with its 60 per cent-plus interest, must back it.

This creates potential obstacles to the ‘buy-out’ going ahead, especially as those objecting to it begin to make their voices heard. Besides Mr Smith, Pastor Eddie Victor, of the Coalition of Concerned Citizens (CCC), a frequent thorn in GB Power’s side, has also called on minority Bahamian investors to oppose the deal.

Mr Smith, meanwhile, said he planned to attend both shareholder meetings - in Freeport today, and Nassau tomorrow - where GB Power, Emera and their advisers will seek to explain the offer and its benefits, to make his views known.

Suggesting he may also initiate legal action against Emera and ICD Utilities’ Board of Directors, whose members unanimously opposed the deal, the outspoken QC blasted: “I guarantee that am I going to take out Judicial Review on behalf of my company and other shareholders to set aside the Government approvals, and a constitutional motion to attack the possible compulsory acquisition of my shares in breach of Article 27 of the constitution. I am going to bring this nonsense to a head.”

Mr Smith argued that neither the BIA nor the Central Bank had “any remit” over his ICD Utilities investment, made through a corporate entity, even though Emera’s statement said they had either ‘approved’ or ‘approved in principle’ the buy-out.

“What vexes me most about this is that they have put a time gun to my head to agree by November 7,” he told Tribune Business, “when this has been going on for many months.

“Instead of having these shareholder meetings in Freeport on Monday, and Nassau on Tuesday, good faith, transparency and accountability demand they ought to have had discussions with all shareholders before the approvals were granted.

“This is the same nonsense that governments have used with big foreign developments for decades: Approve first, consult after. Which is absolutely perverse. The objective of consultation is to get stakeholder views before decisions are made. Once again, the Government has put the cart before the horse.”

Promising that he would seek to have the Government approvals declared “procedurally unfair, and null and void”, Mr Smith described the situation as Emera and the Government agreeing then sale of his ICD Utilities shares - and those belonging to other Bahamian investors - without any approval or interaction with him.

“I may very well be interested to sell,” the QC added, “but out of principle I intend to oppose this transaction, as it prejudices my rights today,” he said. “I own shares in GB Power Company. The power company is my community. Tomorrow, I don’t know what I will own with these Depository Receipts.

“They’re not offering me shares in GB Power and Emera. They are relegating me to outside, observer status. In most countries where the rule of law prevails, most residents invest in utilities as a safe, guaranteed long-term investment. I am being stripped of this with the help of my government. This is not all smoke and mirrors to me.”

Emera, though, has described its offer as “a win-win for all concerned” - including the minority Bahamian investors. Emera is offering them three ‘exit route’ options. They 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 ICD Utilities.

Alternatively, Bahamian shareholders 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.

By taking this option, where four depository receipts will equal one Emera share, Bahamian investors will have 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 for the Bahamian investors, who hold a combined 39.26 per cent of ICD Utilities (translating into 19.63 per cent of GB Power), to take a combination of cash and depository receipts (DRs). Those who fail to specify their choice by November 27, 2017, will also be deemed to have chosen this option.

Capital markets analysts have given Tribune Business a completely opposite view to Mr Smith, arguing that the offer was fair to the minority ICD Utilities investors.

However, one of the consequences of the transaction - if enough Bahamian shareholders approve, and all elect the ‘cash’ option - is that GB Power will become a 100 per cent privately-owned subsidiary of Emera and its Caribbean parent.

Once the Emera transaction goes through, ICD Utilities will cease to exist, and be de-listed from BISX - meaning that its accounts, and those of GB Power - will no longer have to be published in such detail.

That will reduce the costs incurred by Emera and GB Power from having a public company in the Bahamas, but also lowers the amount of scrutiny that the Bahamian public can apply to the monopoly utility’s performance and actions.

Pastor Victor and others are strongly objecting to this - that there could no longer be Bahamian ownership in a key utility asset.

ICD Utilities’ shares will be replaced by Bahamian Depository Receipts (BDR) that will be listed on BISX. Initially, ICD Utilities will be merged into IUL Ltd, an Emera affiliate, with the former’s shareholders given preference shares in the latter. These will then be exchanged for either cash, the BDRs or a combination of the two.

These BDRs, a derivative of Emera shares, are identical to those held by Bahamian investors in Consolidated Water, the reverse osmosis plan operator. They will also fulfill exactly the same function as the BDRs issued by Kerzner International, the former Atlantis owner, prior to the company de-listing and going private.

Given the Bahamas’ economic circumstances, and especially Grand Bahama’s current plight, the suspicion remains that most ICD Utilities shareholders - especially retail investors - will elect to take the cash payout, giving them liquidity they can apply to bills and debts.