The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FOCOL Holdings temporarily increased its bank overdraft by 247 percent to finance “a game changer in our transformation” to beat reduced fossil fuels usage, its chairman has revealed. 

Sir Franklyn Wilson told Tribune Business that the BISX-listed petroleum products supplier more than tripled its overdraft, growing such borrowings by almost $24m from $9.61m at end-September 2020 to $33.344m one year later, to finance the acquisition of additional electricity generation capacity that will be rented to Bahamas Power & Light (BPL).

Disclosing that this had funded the purchase of a 27 Mega Watt (MW) engine currently being installed at BPL’s Clifton Pier power plant to help meet New Providence’s peak summer load demand, he explained that this took FOCOL’s generation capacity to a total 43 MW when added to the 16 MW already leased to the state-owned utility and installed at its Blue Hills location.

Speaking after FOCOL subsequently refinanced the more expensive overdraft with long-term debt after the close of its financial year at end-September 2021, Sir Franklyn confirmed that the energy generation venture was one aspect of the company’s strategy to position itself for a future when its core business - fossil fuel provision - has substantially diminished.

And, apart from further expanding its electricity generation interests, he revealed that FOCOL plans on developing “more than a token presence” in renewable energy with one such solar project “at an advanced stage of planning” although he declined to provide details.

Asked by this newspaper to explain the year-over-year overdraft expansion, some $27.15m of which was refinanced via long-term debt in November 2021, Sir Franklyn responded: “FOCOL today is a very substantial provider of energy. The company has been transformed in a very major way.

“We have 16 MW of generating capacity using Wartsila tri-fuel engines, and we have 27 MW of energy production capacity using a Hyundai engine from Korea. Over the last three years or so the company has really been going through a very intense and robust degree of transformation. When we have finished we will be at 43 MW of generation capacity. That’s a lot.”

The FOCOL chairman said work to install the 27 MW engine at Clifton Pier had already begun, and should be completed in time for summer 2022. He added that the transition from Anthony Robinson, who has moved up to become the company’s chairman, and his replacement as president and chief executive by Dexter Adderley, had gone relatively smoothly.

“What we did was that we financed a lot of that capital cost,” Sir Franklyn said of the overdraft expansion.

“All those engines are very expensive. We purchased them. We used a lot of internal working capital and some overdraft facilities that have since been converted into long-term capital instruments.

“This is huge. This is a game changer for the company. This [energy generation] is capital intensive and it’s a long-term play. FOCOL, we think, is positioned for better times. What we hope is to continue to protect the company long-term in the transition from fossil fuels to. It so happens we were managing this at the same time as COVID-19. Thank God we are where we are.”

Sir Franklyn said FOCOL’s focus on multi-fuel generation engines also highlighted its intentions to be a player in The Bahamas’ renewable energy landscape. “We anticipate having more than a token presence in the area of renewables,” he told Tribune Business.

“We have a project at an advanced stage of planning and, God willing, the public will hear about it in the not too distant future.” Declining to provide details, other than to confirm it is a solar energy project, the FOCOL chairman added: “We hope to be a leader for more to come. With the anticipated demise of fossil fuels, that means more than one way to generate electricity.

“What I have told you is just part of the things happening in the company. It has been transformed in more than one way, and is really well positioned going forward. Yes, we expect some decline in fossil fuel use, but we’re seeking to position the company for the future in terms of generating new revenue streams to compensate for any negative forces.”

Sir Franklyn, meanwhile, slammed the Central Bank’s move to exit its role of facilitating access to the Bahamian dollar-denominated Government securities market. He argued that “it makes no sense” to pursue this policy at a time when the Government desperately needs to expand access, and attract new investors, to its debt amid a looming fiscal crisis.

Calling for the Central Bank to provide “more rigorous analysis”, and greater justification other than saying the move will bring The Bahamas into line with “international best practices”, he blasted: “The Central Bank has announced a policy of withdrawing from the brokerage business....

“I would wish to go on record as saying in as much as that statement is not supported by any evidence of rigorous analysis, saying that doing what they’re doing takes into account the realities in The Bahamas, including the challenges the Government of The Bahamas faces in attracting investors into local debt instruments, it looks to me like something that’s unwise.

“The Government needs more investors. It wants to get more people buying government debt. At a moment when the Government desperately needs new people going to debt instruments,the Central Bank says it will start to stop facilitating at a moment when the Government desperately needs it. How does that make sense?”

The Central Bank recently unveiled its strategy to gradually exit its long-standing historical role as registrar and transfer agent for Bahamas Registered Stock (BRS) and Treasury Bills (TB), facilitating primary and secondary market access to these securities for investors.

Asserting that this will “better align its activities with international good practices”, the Central Bank said it will cease providing such services completely by New Year’s Day 2023. In a phased wind-down, it will stop taking on new investors in government securities by March 1 this year.

Access to government securities will now only be available through a BISX-registered broker-dealer, and all existing investors will have to transfer their portfolios to the same broker/dealers by year-end. However, Sir Franklyn argued that this will make government securities less accessible - especially for new investors - due to the fees charged by the broker/dealers.

“The only rationale is international best practice,” he added. “That is not a compelling enough justification... I humbly believe the Central Bank owes it to the country to give a more compelling case for this or not do it and reverse the policy. 

“If not, it would be wise for the Government to step in and do something. We respect the independence of the Central Bank, but we expect them to behave in a manner of rigorous analysis to support policy.”