The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian investment will ultimately be sought in a $170m special purpose vehicle (SPV) that aims to “surpass” the government’s timeline for this nation to become “a Caribbean renewable leader”.

An Inter-American Development Bank (IDB) report, which has been obtained by Tribune Business, reveals that the multilateral lender will be working with the government to structure the SPV as an entity designed to “speed up the solarisation of the Family Islands”.

While this vehicle will “be initially 100 percent publicly owned”, meaning by the government, the IDB paper discloses that the “participation of Bahamians will be sought” once the risk associated with the project is reduced and its various renewable energy projects become income-producing.

No timeline for this is given, and it is unclear whether Bahamian investment will be sought via a private placement of shares or initial public offering (IPO), or if it will be open to both retail and institutional investors. However, the SPV’s purpose is to channel the proceeds of a $170m IDB loan into the development of utility-scale and roof-top solar facilities.

The government/IDB ambition is for this financing to enable The Bahamas to leapfrog the goal set by the Prime Minister’s Office for the country to produce 4.56 percent of its total energy mix from renewable sources by 2021, thereby making it a regional leader and setting it on course to hit its “30 percent by 2030” target.

“The Government of The Bahamas wishes to create a renewable energy company in The Bahamas to, among others, speed up the deployment of solar power in the islands,” the IDB paper said. “The main purpose is to channel needed development financing... for $170m to deploy solar installations in two areas - roof-top solar and large-scale solar installations.

“The company is expected to be initially 100 percent publicly owned but, from scratch, needs to have the appropriate governance structure to manage the programme with the best standards of corporate governance..... and to gradually offer shares or other form of local private participation.”

The IDB report says the SPV, once created, will be charged with building and operating “large-scale solar facilities” that will supply electricity to Bahamas Power & Light (BPL) under a power purchase agreement (PPA).

“Thus the SPV, upon completion and entering of operation of the large-scale facilities, will receive payment from the utility and start receiving income,” the documents add. “The SPV will initially be largely publicly owned, but as projects reach maturity and start generating income the participation of Bahamians will be sought.

“Gradual private participation needs to be inscribed since inception at the creation of the company, and with appropriate legal consideration to ensure such transition towards private participation is ensured by the governance rules and articles of creation.”

Some observers are likely to view the SPV structure as designed to keep more debt off the Government’s balance sheet, thereby hiding The Bahamas’ true national debt. However, the IDB papers show the plan is for it to act as financier when it comes to the installation of roof-top solar solutions for homes and businesses.

“It is expected that the residential sector may receive discounted rates or longer tenures, while the commercial and industrial sector will receive [financing] resources with a mark-up,” the report said. “In general, it will act as a financial intermediary by itself or via a local bank. The SPV will be in charge of determining the rates and conditions for financing of roof-top solar in each consumer segment.”

“Disadvantaged households” will be a particular focus for the solar roof-top initiative, with installations performed by Bahamas-based providers so that the creation of new local entrepreneurs and jobs is fostered as well as a reduction in this nation’s fossil fuel imports.

The IDB paper added that the SPV will also take the lead in providing the infrastructure for “electric mobility, such as electric vehicles, throughout The Bahamas. “Small islands can now benefit the most from electric cars as their economies continues to improve,” the report added.

“Electric mobility in islands now makes more sense than ever with the advances in battery technology and electric charging infrastructure, and new business models along the deployment of distributed solar energy solutions.

“Electric car revolution will not happen by itself as it requires co-ordinated government action, especially on setting up the proper regulatory environment and financing instruments for electromobility and the base infrastructure.”

The IDB report said the SPV will help facilitate the first delivery of electric vehicle fleets to the Government, and it added: “The programme will help The Bahamas catch up and move ahead of regional leaders on renewable energy penetration.

“The objective is to speed up the solarisation of the Family Islands by deploying, in addition and complementary to the current efforts by BPL, large-scale solar installation in the islands where private sector participation is less likely. This will also deploy the most advanced storage and grid modernisation technologies to improve the reliability and resiliency of the islands’ grid systems.

“Setting up the enabling infrastructure for the solar installations and future additional deployment will particularly target quickly fulfilling, and even surpassing, the 4.56 percent by 2021 renewable energy target of the Prime Minister’s Delivery Unit to become a regional Caribbean leader in renewable energy deployment and setting the path towards achieving the 30 percent by 2030 renewable energy target of the national commitment under the Paris agreement.”