The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Grand Bahama Power Company's Canadian parent is providing an "up to $60m guarantee" to give investors extra comfort the utility will repay $25m worth of bonds when they mature next Friday.

Dave McGregor, GB Power's chief executive, explained to Tribune Business that Emera had agreed to "backstop" the bond repayment to calm any investor doubts that may have been sparked by the combined impact of COVID-19 and Hurricane Dorian on its Bahamian subsidiary.

While GB Power already has "the funding in place" to repay the bond holders from its own resources, he added that it was "one of the fortunate advantages of having a parent" in that its 100 per cent owner can offer an additional layer of security and confidence to investors.

"We have a number of bond holders, and the first tranche is coming up for repayment next week," Mr McGregor said. "What the bond holders are concerned about is the financial status of GB Power post-COVID-19 and post-Dorian, and we have certain covenants that we need to satisfy.

"The bond holders are nervous. They're nervous about The Bahamas, about the Standard & Poor's (S&P) sovereign downgrade. They're worried about our performance post-Dorian, post-COVID-19. They're worried about the Bahamian economy, the Grand Bahama economy, so they're looking to our parent to backstop this to make sure we don't default."

The GB Power chief spoke out after the $60m guarantee was detailed deep in the management discussion and analysis that accompanied the release of Emera's 2020 first quarter results. "The company is in the process of issuing a guarantee of up to $60m relating to outstanding notes of GB Power," Emera said.

"The guarantee will reduce to no more than $35m upon repayment of certain notes that are due May 22, 2020." Explaining the latte aspect, Mr McGregor added: "The reason Emera is saying it will reduce from $60m to $35m is because we already have the funding in place to repay the bond holders next week."

Elsewhere in its earnings release, Emera said the S&P downgrade of The Bahamas was "not currently expected to have a material financial impact on GB Power" despite the Canadian utility giant being called upon to provide an extra security blanket for the bond repayment.

It added that GB Power's 2020 performance was expected to match last year's earnings with the return of business and residential customers to GB Power's grid following Hurricane Dorian forecast to offset the impact of COVID-19.

"GB Power's earnings are expected to be consistent with 2019 earnings, which were lower than normal as a result of Hurricane Dorian. The impact of COVID-19 on GB Power is expected to be partially offset by recovery of load following Hurricane Dorian," Emera said.

GB Power's earnings for the 2019 full-year decreased by CAD $13m ($0.05 per common share) due to reduced customer demand as a result of Dorian. Its full-year revenues declined by 7.4 percent, from CAD$121m in 2018 to CAD$112 for the 2019 full-year, while the value of GB Power's property, plant and equipment dropped from CAD$315 to CAD$282m.

Emera, meanwhile, said GB Power had incurred $13m of the anticipated $15m in Dorian restoration costs it plans to recover from consumers by the end of the 2020 first quarter. However, the extra charge that was supposed to be levied on customer bills from April 1 has been suspended due to COVID-19's impact.

"In January 2020, the Grand Bahama Port Authority (GBPA) approved the recovery of approximately $15m of restoration costs related to GB Power's self-insured assets," Emera said.

"As of March 31, 2020, $13m of these costs were incurred and recorded as a regulatory asset. Recovery of the regulatory asset, due to start on April 1, 2020, has been temporarily suspended as a result of the economic impacts of COVID-19 on Grand Bahama."