Bahamas Power and Light headquarters.
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Electricity consumers were yesterday told to brace for an "adjustment" to their bills via an extra charge as Bahamas Power & Light (BPL) confirmed plans for its mammoth $650m-plus refinancing.
Dr Donovan Moxey, the state-owned utility's chairman, promised that the proposed Rate Reduction Bond issue will ultimately result in "better outcomes" for all Bahamian households and businesses even though the "structure" of electricity bills will change.
Using carefully-worded, guarded language, a BPL statement quoted Dr Moxey as saying the new billing structure would "function as a short-term deposit" that will ultimately enable consumers to enjoy longer term savings from reduced fuel costs and more efficient generation plant.
However, legislation to facilitate the Rate Reduction Bond (RRB) issue, which was tabled in Parliament yesterday, makes clear that BPL's customer base will be relied upon to service what is essentially a doubling of the debt burden associated with the utility to secure its financial future.
The Order to issue the bonds, according to the Electricity Rate Reduction Bond Bill 2019, has to "approve the imposition and collection by BPL of the rate reduction bond fee" and stipulate the initial level at which this will be set.
The Bill, which will replace the Act passed previously by the former Christie administration, provides that the fee can be adjusted - "at a minimum semi-annually - to ensure that the collection of such fee will produce sufficient revenues to pay all ongoing financing costs as the same become due and payable".
And those BPL customers who pay their bills in full, and on time, could find themselves penalised by the actions of delinquent payers. The Bill says fee adjustments "will take into account historical and reasonably forseeable differences between amounts billed and amounts collected", listing "customer defaults and delays" as a key factor determining this variable.
Tribune Business has repeatedly said that BPL’s RRB refinancing, while essential to its future financial health, may provoke controversy among some elements of Bahamian society given that it is ultimately the state-owned energy monopoly’s customers that will pay for it via an extra charge that will be added to their monthly bills.
The original plan, developed by the former Christie administration, calls for the sums raised by this additional charge to be used to pay the interest and principal owed to investors who purchase the bonds.
The Bahamas Rate Reduction Bond Ltd, not BPL, is the special purpose vehicle that will be responsible for issuing the bonds and paying investors due interest. This structure will exchange BPL’s legacy BEC debt and other liabilities for new debt, which will be kept off BPL’s balance sheet via the SPV’s role as issuing agent, thereby relieving the Government of its existing $230m guarantee.
The old liabilities include around $321m in bond and bank debt; a $100m employee pension fund deficit; and other assorted liabilities including the cost of environmental clean-ups at various sites around The Bahamas. It is likely that some of the financing may also replace the $100m short-term funding that helped acquire the 132 Mega Watts (MW) of new Wartsila engines.
Dr Moxey yesterday confirmed to Tribune Business that BPL is seeking $650m through the RRB refinancing, although he declined to comment on the likely price (interest rate) that will be attached to this debt, how many years it will be before the bonds mature, and the initial fee consumers will be charged.
BPL, though, will likely be hoping that its new 132 MW of generation capacity, and the planned Shell North America multi-fuel plant that is due to be constructed and operational by 2021, will reduce fuel and other costs sufficiently that this more than offsets the additional RRB charge added to consumers' bills, resulting in a net decrease in electricity costs.
“The reality of what we found upon taking over the management of the company is that urgent action cannot wait," Dr Moxey said yesterday. "We must stabilise BPL’s finances if we are going to position ourselves for the future.
"This Bill will lead to better outcomes for all our customers. Once implemented, we anticipate an adjustment period as the billing structure changes to adapt to the new bond. In the end it will essentially function as a short-term deposit to help us achieve the necessary long-term savings as fuel delivery costs decrease when Station A [Wartsila's 132 MW] comes online by the end of the year.”
Several observers have already expressed scepticism about whether the December deadline can be met given the extensive testing and installation work that has to be done. Still, Dr Moxey said the RRB debt issue was unavoidable if BPL is to remove then "anchor around our necks" that is its present debt.
"To right the ship and get our fiscal house in order so we can start delivering consistent, reliable power at a lower cost to our consumers, we need to take actions like passing the updated Rate Reduction Bond Bill,” Dr Moxey added.
“BPL's massive debt is an anchor around our necks as we try to fix problems and invest in the future. The Rate Reduction Bond Bill will allow us to restructure the debt and access much needed capital after years of misplaced priorities and inadequate investment in the entity.”
Besides paying out BPL's $321m legacy debt, the RRB issue will also provide $350m in new financing to enable BPL to invest in its generation and transmission and distribution (T&D) network throughout The Bahamas to improve reliability and reduce power costs.
Desmond Bannister, minister of works, told Tribune Business: “BPL will seek to secure $650m. They will then be able to settle their current indebtedness of approximately $321m, thereby releasing the Government from its guarantee and ensuring the company's independence.
"The balance will be utilised for a number of badly-needed capital projects, which I will discuss in some detail during the debate.” Explaining the need for the revised RRB legislation, Mr Bannister added: "Modern bond transactions require a high degree of sophistication.”
Dr Moxey, too, confirmed to Tribune Business that the $350m balance would be invested in infrastructure upgrades or operational support although he, too, declined to give details.
BPL's statement yesterday touted the bond issue as lowering its debt servicing costs because repayments will take place over a longer period of time than its existing debt.
"Ultimately, this legislation will help lead to lower costs for our customers while allowing us to deliver consistent, reliable power to all Bahamians,” Dr Moxey added.
"We know full-well that BPL customers are frustrated with the load-shedding being experienced. It is the intent of the new Board of Directors at BPL to ensure that no Bahamian family ever has to deal with that type of crisis again.”
Comments
ThisIsOurs 5 years ago
"quoted Dr Moxey as saying the new billing structure would "function as a short-term deposit" that will ultimately enable consumers to enjoy longer term savings from reduced fuel costs and more efficient generation plant."
the operative word here is "ultimately". Will it ultimately be seen by you or your great grands in 2100?
Gotoutintime 5 years ago
In other words "you all light bill going up high".
Islandboy242242 5 years ago
So you're saying the bill will be going up in the hope (most likely false hope) that the bill goes down in...errrr..4-5 years? After all the load shedding, burnt up appliances, hot sweaty nights where you can't cook, wash, bathe, post-Dorian effects on the entire Bahamas in one way shape or form, and Christmas coming that an increase on our BPL bills is OK, and that we should brace for it?
Clamshell 5 years ago
Translation: Another “temporary” add-on fee that you’ll be paying as part of your electric bill for the rest of your natural life. And, as a “bonus,” those who actually pay their electric bill every month will be subsidizing those who don’t. Only in the Bahamas ...
Well_mudda_take_sic 5 years ago
Let's try connect all of the dots here:
As a result of decades of fraud and mismanagement, BEC was forced to borrow more and more.....BEC was only able to borrow more and more because the borrowings were guaranteed by the government (the taxpayers).....BEC's borrowings (the debt) finally reached the point where there was no possibility of it being repaid, even if it drastically increased the rates it charged its customers for electricity......BEC's lenders and creditors started threatening to call on the government as guarantor to repay the amounts owed to them by BEC.....under pressure from (and at the direction of) the international lending and credit rating agencies, the government renamed BEC to BPL a few years ago and similtaneously transferred BEC's debt to a special purpose vehicle (SPV).....this was done with the understanding the debt would remain guaranteed by the government pending the creation of a satisfactory scheme to restructure and refinance it, and also directly secure its repayment by means other than the government guarantee......the scheme created will result in new debt reduction bonds being issued to repay BEC's old debt.....the new debt reduction bonds are to be directly secured by an undertaking from BPL to charge its customers for electricity at rates high enough to generate whatever amount of revenue would be necessary to repay the interest and principal amounts as they fall due to the bondholders......meanwhile BPL as the new victim of the same types of fraud and corruption that went on at BEC for decades, is piling on new debt to its lenders and creditors that is of course guaranteed by the government.....and so round and round we go.....BPL's customers are about to be hit with outrageously high and unaffordable electricity bills in what will undoubtedly be a failed effort to repay not only the debts racked up by the old BEC, but also the new debts currently being racked up by BPL. My oh my!
Porcupine 5 years ago
Thank you for taking the time to clarify the craziness of this whole "scheme" as you rightly say.
Sickened 5 years ago
Honestly, am I living in some stoned out zombie land movie where everything is reversed and out of sequence? How and why should I be paying more for less. And when I say less I mean less power supply (cause it always shutting off) I also mean less usage because they done burn out several big ticket items that used to be plugged in and are now in the fuckin' garbage!!!!
bahamianson 5 years ago
BEC abuses you, and then tells you to be grateful for the abuse. Give me more , pleeease. We will never be better as long as we give jobs to unqualified favorites!
proudloudandfnm 5 years ago
LOLOLOLOLOL!!!! Bend over Nassau and take ya buggerin like a man... LOLOLOL!!!!
Dawes 5 years ago
Wait so i will be penalized more due to the fact that i pay my bill on time? Which idiot thought this up? I best start not paying my bill in full so i can save some money. Then i am penalized because governments for the last 30 odd years have not had the will power to do the right thing by BEC. Dam just when you think this country can't get any worse they prove you wrong. I've always thought there will come a day when the riots we see all over the world will come to Bay, seems to be getting closer and closer to that day.
Bahamianbychoice 5 years ago
Too further add to all the comments above.. because of the power insecurity created on their watch it will further cause the interest rates on this bond process to be through the roof...
The Bahamian tax payer will get stuck with paying for the very high interest after already paying for these engines, rental units and high salaries...that have all happened under the present leadership.
You would think at some point they would realize how the country views them and just go away...yet here they are...again. No one believes or respects anything any of them have to say.
themessenger 5 years ago
Amen, just add the Bahamas to the list of those that Mr. Trump considers shit hole countries.............
concerned799 5 years ago
And still there is no privitization of BEC/BPL. Surely this has been the last straw and people insisted it was privitized? They should have done so long ago. (Its not as if keeping it in public hands leads to low rates)
Putting it in private hands is the only guarantee this will not happen again. Every incentive is there precisely for it to happen again! (no one is representing the interest of the wider public in all matters relating to BPL, so if no one will then you might as well just sell it off and at least private owners will be in charge of it and at least the bleeding will stop as far as direct soaks of the public)
Porcupine 5 years ago
concerned, you have it backwards. Were we to hire competent management, available worldwide, to run our national companies, we would have efficient services minus the big profits that privatization has built in. Any surpluses, and yes in a well run organization that would be built in, would be the Bahamian people's. Only for lack of seeing how proper planning and competence can lead to success, are we mentally stuck on "this is the best we can do". It's not.
The_Oracle 5 years ago
So, how about all Nassuvians who experience power cuts frequently and at the most inopportune times simply zero their consumption? Those who can buy generators and supply themselves and a few neighbors (ala shanty town hookups) so as to Bankrupt BEC/BPL in short order would be a powerful statement for ending the a) service abuse b) cost abuse c) appliance abuse d) political control e) Union buggering over what is or has become an intrinsic right whether bills are paid or not. I mean, based on the 5 year political "power turn on scheme while bundling old power bill debts (ala housing crisis) and we promise to turn you on if you promise to pay the current bill and stay current" it must be rgognised as a basic human right. Personally i'd love a business model that allows me to fail consistently and reliably without any onus to improve and with endless access to customer money. We need a national wall of shame. Opposite the Bahamian in sports wall of fame of course. Perhaps our national awards or medals would then be worth achieving.
professionalbahamian 5 years ago
Aboslute robbery!
Please let us know which former BEC/ BPL executive was punished for their stupidity and teefin! Not one! Time to go off Grid - imagine a company that steals, lies, loses money, becomes disfunctional, charges nassau clients for outisland services and fuel losses, and then hey their skills include charging nassuvians additional fees for an fing loan to cover it all! Wow! Shame on you BPL and every person who stole from it. Come on Mr PM and Mr AG do something about this injustice please.
Porcupine 5 years ago
The people are only subsets of the culture. It is pervasive. Beyond a handful of miscreants. This is nationwide. We grew up with it and don't honestly expect it to change. I have lived in a country where I thought the ratio was about 85% to 15%. Honest to dishonest people. Here, I believe those percentages are completely reversed here in The Bahamas. And, that may be overly generous in the honesty department.
sweptaway 5 years ago
Come over to Abaco and watch 3 birds and a goat rebuild the entire infrastructure
totherisingsun 5 years ago
Time for an Alternative Power Supply?
totherisingsun 5 years ago
Pass a law where all Public servants get a Rate Reduction Pension Plan equal to their ministrys debt divided by the number of red plate vehicles in the parking lot as a payroll deduction to an independent Treasury account owned by a co-op of bill paying citizens?
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