The Tribune

• LNG terminal construction tender issued

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light (BPL) already has “a good indication” of the credit rating its upcoming $535m bond issue will receive, a Cabinet minister has revealed, as it makes moves on generation reform.

Desmond Bannister, deputy prime minister, told Tribune Business in a recent interview that the state-owned energy monopoly was still awaiting sign-off on reforms to the Rate Reduction Bond Act that will enable its mammoth refinancing to be placed in both the local and international capital markets.

Those changes have previously deemed critical to giving potential investors sufficient security and confidence to buy into BPL’s rate reduction bond, with its placement understood to have been potentially delayed to mid to late April - possibly to give Parliament sufficient time to debate and pass the amendments to the Act.

Multiple Tribune Business sources, speaking on condition of anonymity, disclosed that CIBC FirstCaribbean, the bond’s financial adviser and placement agent, has been conducting a so-called “market read” in recent weeks to determine the appetite and level of interest among Bahamian investors for the $85m that will be placed locally.

It is understood that major institutional investors and investment banks have been approached to give an indication of how much they, and their clients, would be willing to take-up as well as the interest rate, maturity and other commercial terms that would entice them to buy in.

“We are working closely with the Attorney General’s Office, and they are putting the finishing touches on their work,” Mr Bannister told this newspaper of the Act amendments. “They’ll make the final decision. We’ll have to await the proposed amendments from them.

“I think it’s important to ensure we comply with the requirements of the market. That’s why the attorney general [Carl Bethel QC] and his lawyers are going through it, and going through it very carefully so they can ensure everything meets the legal requirements.

“The provision of this money is going to make all the difference in the world for BPL. It’s going to make all the difference in the world for Bahamian consumers. I think you’ve already seen what we’ve done in lowering rates, and once we get this funding in place and provide the kind of service BPL needs to provide, we’re going to to be able to continue to lower rates.”

Those decreases have been aided by a COVID-19 induced decline in global oil prices over the past year, although they have since ticked back up to more than $64 per barrel based on the West Texas Intermediate index, but also by the fuel price hedging strategy that BPL has implemented.

Mr Bannister, meanwhile, said BPL “is very attractive to investors” even though many observers would argue this is unlikely given its consistent multi-million dollar losses over the past 13 years coupled with concerns about poor service quality, frequent power outages and aged transmission and distribution infrastructure that the bond financing is to help replace.

BPL and its advisers have been targeting an interest coupon of between 7.5 percent and 8 percent for the bond’s international component, and Mr Bannister confirmed that the utility will seek a rating from one of the international rating agencies for the issuance.

Arguing that BPL is “right there on the precipice” of a financial and operating turnaround, the deputy prime minister added: “BPL already has an indication of what the credit rating agencies are thinking. They’re just waiting to start the process, but already have good indications of how they will be rated by the agencies. They already have an indication of what the interest rates are going to be.”

Those interest rates, in turn, will be key to determining just how much Bahamian households and businesses will have to pay to service BPL’s bond debt via the National Utility Investment charge that will be added to their bill once the issue is placed with investors.

Meanwhile, BPL yesterday issued a request for “expressions of interest” for the “engineering, procurement and construction” of the proposed liquefied natural gas (LNG) storage terminal and regasification facility that will provide New Providence’s new power plant with its major fuel source.

The LNG terminal, as well as the new generation plant, are supposed to be financed and constructed under Shell North America’s deal with BPL. While Dr Donovan Moxey, BPL’s chairman, declined to comment, other sources said not too read too much into the fact the construction advertisement came from the state-owned utility.

They explained that the tender’s issue was designed to give construction on the LNG terminal a head start while the two sides concluded their agreement, with BPL’s portal employed for this purpose.

“They are moving forward negotiating with Shell and are really close to getting this deal completed,” one contact, speaking on condition of anonymity, told this newspaper.