The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s leader says he will place Bahamas Power & Light’s (BPL) up to 163 percent fuel charge increase before Parliament’s spending watchdog in a bid to uncover how much government “errors” are costing Bahamians.

Michael Pintard told Tribune Business he will today “raise” BPL’s fuel hedging and $535m bond refinancing before the House of Assembly, as well as when the Opposition-controlled Public Accounts Committee (PAC) meets this week.

He added that the main objective was to establish “some actual figures” for what the Government’s failure to execute the trades underpinning BPL’s fuel hedge have cost Bahamian businesses and households, especially since they will be required to pay “on both ends” - first as taxpayers, then as consumers.

Taxpayers essentially financed BPL’s ability to keep its fuel charge at a relatively low 10.5 cents per kilowatt hour (kWh) for so long, despite the hedge’s unravelling, via government loans to the state-owned utility. With the law now blocking the Government from offering straight subsidies, as it has in the past, those loans must now be paid back by BPL consumers via the inflated fuel charges being imposed over the next 14 months.

Alfred Sears, minister of public works and utilities, who has responsibility for BPL, previously said the Government has agreed to pay Shell some $90m over the next nine months to eliminate debts owed by BPL for its fuel supplies. While this provides an insight into how much the fuel hedging lapse has cost Bahamians, Mr Pintard suggested the total figure was likely much higher.

Speaking after he publicly released a letter to the Prime Minister, asking how much of the fuel charge increase is intended to repay Shell and the Government (taxpayer) plus other questions, Mr Pintard told this newspaper: “We also want to know where they got the funds from [to pay BPL initially] and where they were diverted from. We’re putting a series of questions to them. We’re asking them the same question through every possible means to get an answer....

“The decisions made by the Government, both on the fuel hedging programme and Rate Reduction Bond, two separate issues... the first has cost the Bahamian people in excess of $100m, and we don’t know how deep the financial effect is for the Bahamian people. Our concern on the fuel surcharge is we do not know what the exposure is, and we’re trying to estimate that.

“That’s why we’re going to go to the Public Accounts Committee, raise similar questions and try to get documents. The arrears to Shell is an example. It’s but an indication of how massive the exposure is. We want to drill down to some actual figures. It’s very important because Bahamians have been paying at both ends because of the errors in judgment; bad judgment, by this administration.”

Mr Sears, responding to Mr Pintard’s letter earlier this week, said a forensic probe on events at BPL over the previous five years - including the Minnis administration’s term in office - is now underway and the results will be made public.

However, the Opposition’s leader branded as an “absolute farce” the Government’s insistence that it never saw or reviewed recommendations to execute the trades that would sustain BPL’s fuel hedge and 10.5 cents per kWh fuel charge for all its customers. “Additional documents prove it even more,” he said, referring to e-mails between government ministers and officials on the fuel hedge which the Opposition is threatening to publicly disclose.

“There has to be consequences not only for bad decisions but attempts to cover up bad decisions,” Mr Pintard blasted. “We will raise it again this week, and have a meeting on it this week at the Public Accounts Committee. They have missed their window on two important actions, and we are going to pay.”

The Davis administration and BPL have repeatedly said the initial fuel hedging structure, put in place by the Inter-American Development Bank (IDB) remains in place, which is correct. The December 2020 hedge covered a total 3.565m barrels of oil for BPL that were priced at $40 each and split into three tranches.

This transaction hedged 75 percent of BPL’s fuel needs for 2022, 50 percent of its requirements for 2023, and 25 percent of 2024’s needs via the IDB’s upfront hedge. These were were not hedged 100 percent because BPL needed to monitor global oil price movements so that it did not end up hedging at a price above market costs and thus end up losing money.

The Government, though, is not giving the full story. BPL was supposed to “backfill” the original IDB hedge by purchasing the extra fuel volumes to fully address its needs. This was to be done via the series of trades, known as call options, referred to by Mr Pintard that would have enabled BPL to obtain fuel - covering the 20 percent balance for 2022, 50 percent for 2023 and 75 percent for 2024 - at prices below then-prevailing oil market rates had they been executed.

It was these trades, scheduled to have been executed in tight windows in September 2021 and December 2021 just after the Davis administration took office, that were not carried out. As a result, BPL has increasingly been buying fuel at higher market rates with the fuel charge artificially held at 10.5 cents per kWh via the combination of government subsidies and $90m Shell non-payment. This can no longer be sustained, and consumers must pay up as a result.