The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday said he is “keeping an open mind” on the best method to refinance Bahamas Power & Light (BPL) ahead of “a rapid assessment” that begins today.

Alfred Sears, minister of works and public utilities, told Tribune Business that the findings from the “deep dive” that will be conducted by the Deloitte & Touche accounting firm will provide the platform for BPL’s newly-appointed Board to determine the best route for moving the troubled utility forward while also achieving the Government’s energy policy goals.

Indicating that the former government’s proposed $535m rate reduction bond (RRB) financing mechanism is not totally off the table as an option, he added that he was still “trying to clarify what the rationale was” for the former Minnis administration’s decision not to proceed when it came before Cabinet in the summer.

And Mr Sears said he understood that the planned changes to the Rate Reduction Bond Act, which according to the former Board were essential to the bond issue proceeding, involved transferring property assets held in the name of BPL’s parent, the Bahamas Electricity Corporation (BEC), to the former to give investors extra security and comfort.

Those reforms, too, were never passed or brought to Parliament under the former administration. However, Mr Sears told this newspaper: “The Board was constituted, and Deloitte will be going in tomorrow morning [today]. That is to start the process. Tomorrow will be their first day.

“It is a rapid assessment within 30 days. Once we see what their assessment is, a determination will be made as to whether there will be a need to zero in on any specific matter. We’re just asking them to do a deep dive. We have a new Board and it’s important to know precisely what the situation is.

“There are urgent matters. We have a legacy debt, we have a business strategy that is needing to pivot to more renewables. There are decisions the Board has to make very quickly, and the assessment is to facilitate that and, from a policy standpoint, give us the data that can assist us with that.”

Mr Sears said the Deloitte & Touche review will include the RRB issue, BPL’s fuel hedging strategies and “there is some operational stuff they are supposed to look at”. However, he added that he is “keeping an open mind” on the best financing mechanism for recapitalising BPL, as well as providing funds to upgrade its aged transmission and distribution network.

BPL’s fuel hedging strategy was put into place under the former Minnis administration and is due to end in June 2022 unless renewed. And Mr Sears’ comments further indicate that the $535m bond refinancing mechanism is not “dead in the water” as seemingly signalled by the Prime Minister last month.

Philip Davis said the 20 percent increase in electricity costs that would have been imposed on BPL’s business and household customers, via an additional charge added to their bill that would be used to pay interest on the bonds to investors who purchased them, “cannot be justified”.

However, cash-strapped BPL’s debt and operational woes are not going anywhere, and no alternative to the RRB has been announced by the Government for a financing mechanism that was viewed as the preferred option by both the last Christie administration and its Minnis successor.

The Rate Reduction Bond Act 2015, which provided the legislative platform to facilitate the $535m refinancing, was passed by Parliament when Mr Davis was then-deputy prime minister and minister of works, with responsibility for BPL.

Abandoning the bond now would waste years of work, and several sources have suggested the RRB will likely still proceed but be delayed until next year - and possibly restructured - in the hope better interest rates, and therefore lower costs for BPL consumers, can be obtained.

And, if the bond does not proceed, the Government will be unable to pay out the $246m loan that the former administration transferred from BPL’s balance sheet to its own - a transaction that Mr Davis complained about as recently as last week.

Mr Sears yesterday said he was grateful that the former BPL Board, headed by Dr Donovan Moxey, had provided transition notes to its successor. “We have interrogated them on some of the issues,” he added.

Referring to the RRB, the minister said: “Clearly, it was being explored by the former Board and in June that had a proposal for the RRB before Cabinet, but that was not approved. I’m still trying to clarify what the rationale was.

“There was also a proposal to amend certain legislation. I think, as a condition to satisfy the lenders with respect to the way the RRB was structured, I think it would have required BEC to transfer certain assets to BPL and have them encumbered for the loans. That is as I understood it.”