The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light (BPL) has cut the target for its upcoming bond issue to $580m as it places reliance on “selling our turnaround strategy” to obtain the credit rating it needs.

Desmond Bannister, minister of works, confirmed to Tribune Business that the sum sought has been reduced by just over ten percent from the original $650m because BPL has already received some of the necessary financing through the Ministry of Finance for post-Dorian restoration projects in Abaco.

“That’s the most likely figure right now,” Mr Bannister said of the $580m. “Because of the money we’ve injected through the Ministry of Finance and a number of projects in Abaco, the amount we need is not as high as initially projected.”

The $70m drop in BPL’s borrowing requirement comes as the state-owned utility monopoly still awaits a credit rating for its so-called Rate Reduction Bond (RRB) issue from the likes of Fitch, Standard & Poor’s (S&P) and Moody’s.

The rating is vital to pricing the bond, meaning it is key to determining how much BPL’s business and residential customers will pay to service the debt and repay the investors and buy it. With BPL announcing last week that it hopes to place the issue by mid-February, an assessment of the bond’s creditworthiness is needed imminently to meet this timeline.

However, the evaluation is taking place against the impact of Hurricane Dorian on the Bahamian economy and the Government’s financial position. With a $677.5m now deficit projected for 2019-2020, along with a $9.5bn national debt in five years’ time, the weakened sovereign creditworthiness has already impacted the credit ratings of other Bahamian entities.

Fitch recently slashed the Nassau Airport Development Company’s (NAD) outlook from ‘stable’ to ‘negative’, implying that a rating downgrade is possible in the next 12-18 months, although it kept the Lynden Pindling International Airport (LPIA) operator’s credit rating the same.

Fitch justified its move due to the deterioration in the Government’s financial position post-Dorian. Given that it typically rates infrastructure-related projects, entities and their debt offerings, it is highly likely that BPL has sought a rating from it and will have to overcome the same sovereign obstacles that faced NAD.

Dr Donovan Moxey, BPL’s chairman, told Tribune Business that he was optimistic that the strength of BPL’s recovery plans would more than offset concerns about The Bahamas’ sovereign creditworthiness in rating the RRB issue, and therefore the latter would have no impact on the ultimate outcome.

“All I can tell you is we’ve had very positive conversations with our financial advisers, and the meetings with the rating agencies went very positively,” Dr Moxey said. “Our job is to sell the turnaround strategy for the company to the rating agencies.

“We feel optimistic. We have no way of knowing, but we’re very optimistic we’ve put our best foot forward. We believe we have a very good strategy, and we’re very optimistic investors will buy into it.”

It is unclear whether the reduced sum BPL is seeking will have any impact on what businesses and households will have to pay in terms of the extra National Utility Investment Bond fee that will be added to their bills. Present estimates suggest this fee will be equivalent to 15 percent of consumers’ current consumption, but the credit rating is likely to be the bigger influence.

Mr Bannister added: “One of the real challenges is that The Bahamas is not a typical onshore American entity. The way risk is assessed on relation to a small sovereign country like The Bahamas is somewhat different.

“We are anticipating that we need to be able to have funds in place to do what we need to do change this paradigm we’ve lived through unhappily for so long.”

Dr Moxey, meanwhile, told the Bahamas Business Outlook conference that BPL expected to have power restored to the whole of Abaco by the end of March. He added that while utility-scale solar and other renewable generation “is going to come, it’s going to happen”, grid stability needed to vastly improve to accommodate its inclusion in The Bahamas’ generation mix.