The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The deputy prime minister yesterday hailed Bahamas Power & Light’s (BPL) fuel hedging strategy for bringing electricity rates to an all-time low but made no mention of when its $535m refinancing will occur.

Desmond Bannister, in his budget debate contributing in the House of Assembly also voiced optimism that “there will be no load shedding this summer” despite the continued wait for the Rate Reduction Bond (RRB) that will refinance $321m in legacy debt and place the state-owned energy monopoly on a more sustainable footing.

Tribune Business sources earlier said the bond’s issuance, which was initially supposed to have happened just prior to the COVID-19 pandemic’s start, has now been pushed back into July at the earliest although BPL’s and the government’s advisers continue to pledge it will happen.

Mr Bannister’s budget presentation shed no clarity on when the $535m bond will be placed, although he hinted that BPL had not been able to obtain the interest rate/debt servicing cost it had been seeking as a result of the pandemic and had been forced to alter strategy.

“The Rate Reduction Bond will allow BPL to make the much-needed additional investments in both generation and our transmission and distribution network, as well as in training of employees in order to build greater capacity within the organisation,” he said.

“In February 2020, BPL/BRRBL (Bahamas Rate Reduction Bond Ltd) were close to launching the Rate Reduction Bond transaction in a listed, public format. However, following the declaration of COVID-19 as a global pandemic by the World Health Organisation in March 2020, the public (capital) markets were severely impacted. As a result, BPL/BRRBL had to delay launch of the transaction.

“In July 2020, BPL and its lead arranger began to explore alternative funding options. These centred on accessing different markets and debt formats, using the Rate Reduction Bond structure to minimise the cost of debt ultimately borne by BPL customers. You will hear more about this as BPL takes steps to launch the Rate Reduction Bond in short order.”

Bahamas Rate Reduction Bond Ltd is the special purpose vehicle (SPV) that is being created to issue the bond. It will also collect payments from BPL customers to service and repay the $535m debt, and be responsible for remitting this to the investors who purchase the bonds.

Mr Bannister further signalled that much relies on the $535m refinancing when he said that the start date for constructing BPL’s new Clifton Pier power plant, an investment in which Bahamians will have equity ownership, depends on placing the bond issue.

In an address which sought to focus on BPL’s positive progress, Mr Bannister added: “As a result of a deliberate hedging strategy, our power bills are now lower than any of us can remember.” This really means that rates are lower, or at least fixed, giving consumers certainty over both the base tariff and fuel charge. Whether electricity bills are at an all-time low depends on consumers controlling their consumption.

Focusing on New Providence, he said BPL had potentially up to 100 megawatts (MW) of excess generation capacity to meet summer peak demand. “We can safely account for a minimum of between 315 and 350 MW across the summer against an expected summer peak load of 250MW,” Mr Bannister added.

“For reference, the highest recorded peak reached is 248 MW in 2017. So, Mr Speaker, we feel confident that there will be no load shedding this summer.” However, no load shedding does not mean no power outages as the former is just one cause of the latter.

Load shedding, which plagued New Providence in 2019, is caused when power demand exceeds supply. However, outages can be caused in multiple ways, such as problems with the transmission and distribution grid.

The deputy prime minister acknowledged there have been localised power cuts caused by weather-related events or drivers crashing into power poles. He added: “BPL is working to improve its transmission and distribution capabilities to decrease the number of outages, and they know that I expect that appropriate action will be taken when outages are caused as a result of human error.”

Mr Bannister then said: “BPL is now marching forward with a complete digital transformation plan, inculcating technology, training and development, and an appetite for consistent improvements in customer service into the fabric of its operations.

“BPL has now turned its attention to improving the transmission and distribution network by upgrading its communications lines from copper to fibre optic so that faults impacting the transmission and distribution network will be cleared more quickly, resulting in reduction of forced outages to customers as well as lessening the damage impact to equipment.

“The improvement in fibre communications will improve BPL’s ability to remotely address outage incidents without the need to deploy operators to field locations. Our goal is to build a self-sustaining utility that is capable of meeting the growing power infrastructure needs of the country as additional islands are developed throughout the country.”

Mr Bannister said benchmarking exercises showed BPL was exceeding its performance goals on both the length and frequency of power outages. “Another verifiable metric demonstrating the improvements at BPL is a comparison of feeder trips,” he added.

“Feeders are the distribution circuits that supply power to one or more neighbourhoods. The drastic reduction in feeder trips year over year testifies to the appropriateness of the steps we have taken.”