The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government will take further "policy decisions" before the proposed $35 million buy-out of GB Power Company's Bahamian investors receives final approval, it was confirmed yesterday.

K P Turnquest, the Deputy Prime Minister, told Tribune Business that the Government was assessing the implications of Emera's offer and planning to issue a statement in response to concerns raised through this newspaper.

"It's fair to say the Government is taking a look at it," he said of the proposal, "and we will make some policy decisions with respect to it before any final transaction can be agreed."

Mr Turnquest, the MP for east Grand Bahama, declined to comment further because he did not "want to step on the toes" of any statement the Minnis administration will issue. He also emphasised that both Emera and ICD Utilities, the BISX-listed holding vehicle that owns 50 per cent of GB Power's equity, were publicly-traded companies.

However, the Deputy Prime Minister's comments will likely encourage opponents of the buy-out offer that the Government is applying greater scrutiny than originally thought.

They also suggest that final approval by the Government and its regulators is not 'a done deal', as some had feared, given that Emera's initial release announcing the buy-out said it had received a go-ahead from the Bahamas Investment Authority (BIA).

GB Power's Bahamian minority shareholders, who hold their collective 19.63 per cent stake via ICD Utilities, were meanwhile urged to "stand their ground and not sell" to Emera.

Pastor Eddie Victor, president of the Coalition of Concerned Citizens (CCC), yesterday expressed concern over the seeming silence from the Government, its regulators and the Grand Bahama Port Authority (GBPA) in relation to the Canadian utility's buy-out offer.

Pastor Victor and the Coalition, which have been a constant 'thorn in the side' of GB Power, said the fact Emera was willing to make such an offer indicated the shares held by Bahamians were much more valuable than many thought.

He added that the offer by Emera, GB Power's 80.37 per cent majority shareholder, was also inconsistent with ICD Utilities' creation as a vehicle that would ensure continued Bahamian ownership and pay out a "guaranteed" dividend every year.

Pointing out that this dividend policy had not been adhered to, amid numerous capital expenditures and GB Power ownership changes over the past decade, Pastor Victor likened Emera's offer to "corporate strong-arming that is attempting to devour the Bahamian shareholders".

"We want to make an appeal to the shareholders not to sell," he told Tribune Business. "We are going to make a specific appeal to shareholders to stand their ground and not to sell. Most Bahamians are amazed, really, that something like this is being allowed to happen."

Pastor Victor said the Coalition's letters expressing concerns about the buy-out to Prime Minister Dr Hubert Minnis; the BIA; the Central Bank of the Bahamas; and Securities Commission of the Bahamas had yet to receive a formal response.

However, one well-placed government source, speaking on condition of anonymity, expressed annoyance last night that Bahamian shareholders who elected to take Emera Depository Receipts (DRs) in exchange for their ICD Utilities shares would be subjected to a 25 per cent Canadian 'withholding tax' on any dividend payments.

"That's not what was the original intent," they told Tribune Business. Emera/ICD Utilities themselves confirmed that Bahamian investors would be hit with this taxation in a nine-page, 50-question 'Frequently Asked Questions', which looked as it was rushed out yesterday in response to the concerns being raised.

"Dividends paid on the underlying Emera shares will generally be subject to withholding taxes in Canada," the nine-page document confirmed. "For a resident of the Bahamas that will, in most cases, mean a 25 per cent withholding tax on dividends. Please refer to the proxy statement and your own tax advisor to understand your personal tax implications."

The Government source, meanwhile, suspected there was "a lot more to this" offer by Emera than has been disclosed so far. They also questioned whether the buy-out offer's timing coincided with the completion of debt repayments related to GB Power's new generation plant.

"Does it mean they will be increasing profits at the same time as they want to take us out?" the source asked. "It just seems coincidental".

With Emera's offer holding out the possibility that GB Power will become a private company, with no obligation to disclose its annual financial statements to public scrutiny, the source also suggested that the Government seek something in return for approving the deal.

This, they speculated, could involve requiring GB Power to subject itself to regulatory oversight by the Utilities Regulation and Competition Authority (URCA) rather than the Grand Bahama Port Authority (GBPA) - something the utility has been resisting via the Supreme Court.

Pastor Victor, meanwhile, said the Coalition plans to send a letter expressing its concerns over the Emera buy-out offer to the GBPA's regulatory committee today.

Acknowledging that he was "very concerned" about the GBPA's silence, given that it is GB Power's primary regulator, the Coalition president accused the Canadian utility of "trying to devour" the Bahamian minority investors in ICD Utilities.

"Those shares are much more valuable than the shareholders think," he told Tribune Business. "From a simplistic view, if Emera is trying to buy them up, they see those 19.63 per cent as very valuable - probably with greater expansion plans of theirs in mind. In my opinion, they're offering a very low price for those shares. Emera are making this move because something's up."

Emera has described its offer as "a win-win" for all stakeholders, providing "liquidity and value" for the Bahamian minority while giving them options as to their investment's fate. As for the benefits to the Canadian utility, it said the buy-out - provided it is approved by a majority of Bahamian shareholders - would increase its investment in the Caribbean and "streamline" GB Power's ownership structure.

However, observers yesterday suggested that a $35 million buy-out represented an expensive 'streamlining'. Pastor Victor added: "I think that on so many decisions made in the past relating to foreign companies in our country we've been sold out as Bahamians.

"We're not thinking futuristically and empowerment - empowering Bahamian ownership and participation. I don't think we're thinking along those lines.... Our understanding is that most of the Bahamian shareholders in Grand Bahama that attended Monday's meeting were very unhappy, and felt Emera were forcing them to sell their shares.

Pastor Victor added that the offer, which could eliminate all Bahamian ownership in GB Power, was "inconsistent" with the rationale for creating ICD Utilities and making shares available to Bahamians via an initial public offering (IPO).

"When ICD Utilities was formed, it was with the goal to make shares available to Bahamian shareholders, and to ensure there was a system put in place so there was a guaranteed payment of dividends every year," he told Tribune Business.

"What is happening now is inconsistent with why ICD Utilities was formed. And dividend payments have been very few." It is unclear whether appeals to shareholder consciences will have any impact, and much depends on how ICD Utilities' share roster is structured.

Institutional investors, such as pension funds, insurance companies and investment banks, are likely to hold the bulk of minority shares, and they will be swayed more by whether they think Emera's offer is a 'good deal'.

The GB Power buy-out is not 'a done deal', since it requires "not less than 50 per cent" of minority, non-Emera investors in ICD Utilities to vote in favour of it at the special and annual general meeting (AGM) on November 8. Another condition is that "75 per cent or more" of ICD Utilities' investors, including Emera with its 60 per cent-plus interest, must also back it.

Bahamian shareholders have been given three 'exit' 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.