The Tribune

• PM, Pintard accuse each other of ‘false’ statements

• Davis blames FNM for leaving unpaid debt ‘legacy’

• Opposition slams public burden from hedge move

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister and Opposition’s leader yesterday accused each other of making “false” statements as renewed hostilities erupted over Bahamas Power & Light’s (BPL) $150m in unpaid bills.

Philip Davis KC slammed Michael Pintard for uttering a “blatant, blatant untruth” as the duo clashed in the House of Assembly over what had caused this arrears, which administration was responsible and whether it was linked to the ongoing controversy surrounding BPL’s fuel hedging initiative.

The Opposition leader, though, hit back by asserting that the Prime Minister was making statements “which are patently false” as BPL’s financial woes consumed much of the House of Assembly debate on the Government’s just-released 2022 Fiscal Strategy Report.

The two exchanged blows as Mr Davis sought to discredit the BPL fuel hedging strategy implemented in summer 2020 under the former Minnis administration, while also arguing that the $150m arrears disclosed in the Fiscal Strategy Report largely related to “legacy” debt owed to the energy monopoly’s fuel supplier, Shell.

The Prime Minister, asserting that much of the Shell debt was incurred under the Minnis administration, also denied there was any connection between BPL’s $150m unpaid bills and his administration’s September 2021 decision not to execute trades to acquire further low-cost fuel that would have underpinned the utility’s existing hedging strategies.

Instead, he argued his government made “a reasonable decision” to “deal with the emergency in front of us” by electing to tackle BPL’s existing payment arrears and imminent repayment of a $246m loan rather than enter into new hedging arrangements.

The Free National Movement (FNM), though, has constantly argued that the failure to support the hedging by purchasing extra cut-price oil volumes is responsible for the up to 163 percent fuel charge increases that many consumers will see in their light bills this summer when energy consumption peaks.

The latest House of Assembly clash broke out after Tribune Business last week revealed the extent of BPL’s debts. “The recent disclosure of approximately $150m of payment arrears of Bahamas Power & Light (BPL) represents a significant unbudgeted liability of the Government,” the Fiscal Strategy Report said. “To ensure continued provision of essential electrical services to the public, the Government has committed to ensuring payment of this liability by the corporation.”

Those connected to the Davis administration have reacted furiously to this newspaper’s report, and linking the $150m to the fuel hedging controversy, with the Prime Minister yesterday singling out its author by name in the House of Assembly. However, the Government has to-date not demanded any correction or retraction, produced any evidence to rebut the article or asked to publish a counter viewpoint.

Mr Davis, kicking-off his counter-attack, told the House of Assembly that BPL “was, to give it a technical term, a complete mess” when his administration took office in September 2021. He said: “A $246m balloon [loan] payment was due in February 2022. There was no plan in place to pay for it. They were in significant arrears to all their vendors; all of their vendors, they were in arrears.

“They failed to come up with a semblance of a plan to move BPL to sustainability. They kept talking about a Rate Reduction Bond (RRB), but the market wasn’t having it. They had no other ideas. A bond like that is one instrument, not a comprehensive plan. BPL’s record-keeping was so poor that they could could not even access reimbursement from the Inter-American Development Bank (IDB) for Dorian expenditure.

“For every dollar spent they could have been reimbursed. They didn’t have the receipts, they did not have the record-keeping to do it.” The Government preferred the Ministry of Finance’s concerns to advice from BPL’s former Board and management in declining to execute the fuel hedge-supporting oil purchases due in September and December 2021.

Tribune Business previously reported the ministry’s concerns that the Government and BPL last year lacked the $40m in free cash needed to finance the necessary trades. Officials said the cash-strapped position at both the Public Treasury and BPL in September 2021 meant there was simply no liquidity available to finance the acquisition of more below-market oil to further underpin BPL’s fuel hedge.

BPL also faced having to finance the $246m loan, referenced by the Prime Minister yesterday, which was due to mature in February 2022 with no funds to repay it. Besides concerns related to the availability of necessary financing, there were issued with the actual design of the hedge, the costs associated with it and the actual transaction.

Turning to the hedging issue yesterday, Mr Davis said: “There’s been much noise about hedging. There were multiple hedges in place [when his administration took office]. None of the hedges in place were stopped or cancelled. None, I repeat, was stopped or cancelled.

“There was a request to review one of the hedges that was expiring, and our government decided that instead of choosing to pay new [hedging] premiums, we decided to make progress on the very significant arrears left in place.”

The Prime Minister then alleged that the Minnis administration “had the same opportunity in June 2021” to approve further traded but declined to do so, adding: “You wouldn’t know that from all the noise they make.” However, Tribune Business contacts yesterday said no requests for any additional requests were made of the former administration for further BPL trades in June 2021, contradicting the Prime Minister’s position.

And Mr Pintard, speaking to this newspaper last night, indicated that the then-BPL Board’s June 2021 presentation to the Minnis Cabinet - of which he was part - involved the the utility’s proposed $535m Rate Reduction Bond (RRB) refinancing which ultimately never proceeded.

The Prime Minister, addressing the House of Assembly yesterday, added: “Let’s remember what a hedge is. It’s a bet, a gamble.” While it was designed to lock-in fuel prices in advance, so that electricity consumers enjoy price stability and predictability, he cited the example of a Florida utility that lost billions over a ten-year period after spot market oil prices declined below the price at which it had hedged.

And Mr Davis also implied that executing the September 2021 trades would have been of little use in protecting Bahamian businesses and households from the oil price spike produced by Russia’s invasion of Ukraine in February 2022. This was because the hedge they were tied to “only covered a period beginning in July 2022”.

“In September 2021, we decided to deal with the emergency in front of us rather than making a forward bet, a forward gamble. It was a reasonable decision,” Mr Davis argued. Not so says the Opposition, which has consistently charged that failing to execute the hedge-supporting trades has triggered a chain reaction resulting in the rolling series of fuel charge hikes consumers will face in their electricity bills throughout 2023.

Much of the political back-and-forth would likely ease if the Government publishes a detailed breakdown of BPL’s $150m in unpaid arrears, identifying who it is owed to, how much each creditor is owed, when every debt was incurred and the plan for paying this off. The Prime Minister indicated he would do just that following another heated exchange with Mr Pintard during the House of Assembly’s afternoon session.

Responding to the Opposition leader’s suggestion that BPL had fully settled its Shell fuel bills before the Minnis administration was voted out of office in mid-September 2021, Mr Davis branded this a “blatant, blatant untruth”.

Referring to Mr Pintard’s information sources, he said: “You can tell them they lied. Stop pedaling untruths. Because that is untrue and you are pedaling it. You are pedaling untruths. Shell was owed over $100m that was not paid by the former administration.”

But multiple Tribune Business sources, speaking on condition of anonymity, yesterday said the former BPL Board under the Minnis administration had settled Shell’s bill in full every month for fear any unpaid arrears would give the multinational energy giant leverage in their negotiations over the deal to develop a new multi-fuel power plant in southwest New Providence.

This was last night backed by Mr Pintard, who told this newspaper that BPL’s fuel bill to Shell had “a clean bill of health” in documents presented to the Minnis Cabinet concerning the Rate Reduction Bond (RRB) refinancing. He added that the energy multinational did not feature in any list of vendors owed “legacy debt” that were due to be paid off from the bond’s proceeds.

If such assertions are correct, it would suggest the unpaid Shell debts - and, indeed, much of BPL’s $150m arrears - were largely incurred during the period after the Davis administration took office. Neither the 2022-2023 Budget, nor the previous Fiscal Strategy Report, made any mention of the $150m BPL arrears, and it was only in this year’s document that they suddenly became “a significant unbudgeted liability” for the Government and Bahamian taxpayers.

Mr Davis, though, yesterday asserted that BPL’s $150m arrears were largely composed of unpaid fuel bills that had “failed to be paid by the FNM”. He was responding to Mr Pintard’s attack that he was providing the House of Assembly with “patently false” information in saying the Minnis administration was asked to execute the necessary trades in June 2021.

The Prime Minister responded by stating the Opposition leader must answer whether the administration he was part of rejected the trade execution that month. However, Mr Pintard retorted: “You cannot recover on this issue. A Cabinet paper was prepared for September [2021]. This administration had the opportunity to do so. They failed to execute it. This has resulted in an up to 163 percent increase in the fuel charge.

“These documents go further. It talks of a $150m liability. This administration didn’t think it important enough to come to the public and explain the $150m liability until now.” Mr Davis, accusing Mr Pintard of “drinking the Kool Aid” from Tribune Business, hit back by saying of the $150m: “It speaks to the Government paying this legacy debt owed to the fuel supplier. It has nothing to do with the hedge.

“It has to do with the debt that was failed to be paid by the FNM. It’s an accrued bill.” Continuing despite Mr Pintard saying: “Whatever you want”, Mr Davis added: “It’s an accumulation of $150m of legacy debt at BPL, and we are paying $10m a month to satisfy that. It has nothing to do with hedging. It’s the fuel supply not paid for.”

Alfred Sears, minister for public works and utilities, who has responsibility for BPL, last October informed the House of Assembly that the utility’s debt to Shell was around $90m as he unveiled the plans to pay it off in a series of $10m monthly installments through to June 2023. The $90m potentially accounts for the bulk of the $150m arrears identified in the Fiscal Strategy Report.

Mr Pintard, undeterred, said: “The issue of how that accumulated. The failure of this administration... We’ve done multiple press releases as to how this administration by failing to execute in September, by failing to execute in February, accounted for much of the arrears shown here.”

Again, Mr Davis denied that the Fiscal Strategy Report’s $150m arrears was connected to BPL’s fuel hedging and failure to execute the supporting trades. “Go to your source and get the information corrected,” he told Mr Pintard, saying of the Opposition leader: “He’s saying a lot of false things in the House. There was no plan to address the legacy debt owed.”

The FNM chief, though, while reiterating his regret that the Minnis administration did not approve BPL’s $535m refinancing, denied Mr Davis’ assertions by arguing that the bond “did find an audience in the international community that was very favourable initially to taking advantage of it” until rising global interest rates made its placement unattractive.

Mr Pintard also refuted suggestions that the former Board had no comprehensive turnaround strategy for BPL, and accused the Government of seeking to “white wash” the fuel hedging controversy and the resulting impact it is having on consumer bills. Mr Davis, though, asserted that “no one was listening” to the RRB pitch, and added: “The RRB went nowhere. They had four years to get it right. Did they?”

There was, though, no explanation for why Bahamian businesses and households will be paying fuel charges that are much higher than current global oil market spot prices even though the latter have decreased compared to the February-March 2022 highs. Global oil prices were last night trading at $74.91 per barrel on the West Texas Intermediate index, and $81.77 per barrel on Brent Crude.

The $90m debt to Shell is likely to have been accrued because BPL held its fuel charge at the hedged 10.5 cents per kilowatt hour (KWh) price even after the trades to secure extra cut-price volumes were not executed. This resulted in BPL having to buy increasing fuel volumes at higher global market spot prices, and the 10.5 cents was insufficient to cover its fuel costs.

BPL’s fuel costs are supposed to be passed on 100 percent to consumers by law, and government officials last October conceded that it had cost taxpayers “tens of millions of dollars” to hold the utility’s fuel charge at 10.5 cents per KWh. With the Government prevented from providing direct subsidies, the higher BPL fuel charges are required to reimburse the Government for paying-off Shell’s debts and effectively keeping the lights on.