The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light (BPL) has been forced to push back key capital upgrades because of a near-six month delay in completing its $100m short-term financing raise.

Darnell Osborne, pictured, BPL’s chairman, confirmed to Tribune Business that the fund-raising - originally scheduled to close in January - was “literally closed last week”.

She explained that the delay meant BPL will now have to push maintenance and other capital improvements back past summer, when energy demand peaks, with some parts taking up to six-eight months from the time they are ordered to arrive in The Bahamas.

Mrs Osborne admitted that Clifton Pier, the main power plant supplying New Providence, was “in a very bad state” due to lack of maintenance over multiple years as a result of BPL’s financial woes.

This, she added, was forcing the energy monopoly to increasingly rely on a Blue Hills power plant that runs off more expensive fuel, further increasing the electricity bills of Bahamian households and businesses at a time when global oil price are already rising.

BPL’s chairman also revealed that the utility monopoly hit its short-term financing target only by “topping up” the old $211m syndicated loan to its parent, the Bahamas Electricity Corporation (BEC), which was recently refinanced following Parliamentary approval.

“We got the exact amount we had applied for. It’s not only a new loan,” Mrs Osborne told Tribune Business. “We topped up the $211m loan we had paid down.

“We were able to receive $75m for BPL, and then we were able to top up that $211m for BEC. We still have the two entities, and were able to get just over $100m. We just literally closed the deal last week. It was to get some money for breathing room, for capital expenditures.”

But the near half-year delay in obtaining this financing means BPL will have to delay improvements it had hoped to effect prior to summer until later in 2018.

“We had hoped to have this money back in January,” Mrs Osborne said. “We have to prioritise what capital items we purchase at this stage. With some of it we have to wait until the summer is past and then take down.

“At least it gives us some breathing room to order parts, but sometimes the lead time [on those parts] is six to eight months. We’re being very careful in prioritising, and have to spend on the protection specialist on the ground and some other items we need.”

BPL moved to hire a foreign “protection specialist” in May, in a bid to identify weaknesses and potential instabilities in its existing electrical grid, and ensure all systems are better able to withstand future weather-related events such as lightning strike.

“It’s an expensive undertaking,” Mrs Osborne added of the “specialist’s” work. “These people are few and far between, and so they come at a tremendous cost. We had to wait until they were available to come on the ground. It’s not cheap; it’s quite pricey.”

The 270 Mega Watt (MW) liquefied natural gas (LNG) power plant, to be built and operated by Shell North America at Clifton Pier, is not scheduled to become operational until 2021.

While the Minnis Cabinet approved Shell’s selection as the preferred bidder, the terms of its agreement - including pricing and other elements - with BPL are still being hammered out between the two sides.

Mrs Osborne described talks between the two parties as “going well” and “moving”, and suggested they would shortly be in a position to sign an agreement. “We’re in the process of still completing the Memorandum of Understanding (MoU),” she added. “We met recently and should be in a position to have that signed off in a month or two.”

With a three-year wait for Shell’s power plant to go live, the BPL chairman said the utility was focused on potential fuel ‘hedging’ strategies and other efficiency-related improvements to minimise energy costs in the interim.

“We are continually working to try and become more efficient to keep the cost down,” Mrs Osborne added. “I do know there are some tools we are looking at in terms of hedging, which the finance executives are looking at and working on.

“In the interim, we’ll continue to look at these avenues to keep the cost down, and improve the efficiency at Clifton Pier power station which has the cheaper fuel to reduce reliance on Blue Hills. These are the things we are going to focus on.”

She acknowledged, though: “Right now, Clifton Pier is in a very bad state, so we’re running more on the Blue Hills station. It’s just had years of not being maintained properly in terms of lack of funds and ordering of parts. We’re just beginning to work on that now..... The money was the big issue.”

Her concerns were echoed by Desmond Bannister, minister of works with responsibility for BPL, who said that the utility’s equipment is so old that, in some cases it is impossible to find replacement parts because the manufacturer no longer makes them.

“The equipment is so old and antiquated they cannot find replacement parts. It’s that bad,” the Minister told Tribune Business.

Mrs Osborne said such restrictions meant BPL had been unable to release all staff who had wanted to take the recent voluntary separation package (VSep), an exercise that was originally targeted at saving the utility between $1-$2 million per month on its wage bill.

“Given the state of the plant and equipment, we need to make sure we have people in place to deal with it,” she explained.