The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Government loans to state-owned enterprises (SOEs) and agencies near-tripled during the first nine months of the current fiscal year to enable Bahamas Power & Light (BPL) to pay off its fuel bill arrears.

Simon Wilson, the Ministry of Finance's financial secretary, yesterday confirmed the $80m increase in such "bilateral loans" during the three months to end-March 2023, which took the nine-month jump to $110m, represented financial support to the state-owned electrical utility to enable it to pay-off past due and outstanding debts.

"You're correct. That's BPL," he replied, when asked about the figures, which were contained in the Ministry of Finance's latest quarterly public debt statistical bulletin for the quarter to end-March. Asked whether these loans were to help finance payments to Shell, Mr Wilson confirmed: "Yes, that's correct."

Under the heading "debt owed to government", the debt bulletin confirmed: "Agencies and government business enterprises’ (GBEs) bilateral loans with the central government increased by $80m over the review quarter to $150.8m at end-March 2023, and by $110m since end-June 2022."

Figures provided in the bulletin showed that BPL's debt had risen from $113.6m at end-December 2022 to $192.3m at end-March 2023, the increase matching the $80m rise noted earlier on the report. This sum had also risen from $85m at end-June 2022, again matching the $110m increase for the nine-month period.

The Opposition, though, yesterday seized on the increase to again attack the Government over what it branded as "the self-inflicted disaster" of failing to execute the additional low-cost oil purchases in September 2021 to support BPL's fuel hedging strategy. It argued that the debts owed to Shell, which had caused the jump in government financial support, had accrued from the failure to lock-in additional cut-price fuel volumes to support the hedge.

Kwasi Thompson, the Opposition's finance spokesman, called for a "fulsome explanation" for the $110m lending increase and a breakdown of both the terms and interest rates involved. Asserting that the Debt Management Act requires lending to come from sums approved by Parliament, he said: "We call on the Government to indicate what appropriations were made by Parliament for this $110m in lending to state-owned enterprises.

"The Opposition questions whether this $110m loan represents the proceeds that BPL needs to pay off its fuel arrears due to the self-inflicted disaster the Davis administration created by their failure in October 2021 to execute the BPL fuel hedge trades as was recommended by the BPL management.

"In other words, the massive failure by this PLP government on this BPL matter, we believe, has caused the Government to bail-out BPL and pay for the fuel arrears that built up because this government refused to act. The Bahamian people are once again on the hook....," Mr Thompson argued in a statement.

"We demand that the Government provide a full report on the $110m in loans from government corporations along with all relevant terms and conditions. The Government must also show where Parliament appropriated the monies for this lending and explain why they feel it is appropriate to saddle the Bahamian people with the debt incurred by their disastrous decisions."

BPL's fuel hedging, and the Davis administration's decision shortly after taking office in September 2021 not to execute the trades that would have secured additional cut-price oil volumes to keep consumers' fuel charges relatively low between 10.5-11.5 cents per kilowatt hour (kWH), has become embroiled in a firestorm of political controversy.

Several sources have suggested there were good and valid reasons why it did not do so, namely that the cash-strapped government did not have the necessary $40m funding and cash flow available to finance the trades, especially with a $246m BPL loan coming due for repayment in February 2022 and nothing allocated to cover it.

However, the latest Fiscal Strategy Report revealed the extent of BPL's financial woes and the need for government support. “The recent disclosure of approximately $150m of payment arrears of Bahamas Power & Light (BPL) represents a significant unbudgeted liability of the Government,” it 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.”

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.

However, the Prime Minister in early February told the House of Assembly that BPL’s $150m arrears were largely composed of unpaid fuel bills that had “failed to be paid by the FNM”. The Opposition subsequently asked for a breakdown of this $150m, what it represents and when the debt was incurred, but Mr Sears last month said the information was still being put together by a combination of BPL, the Ministry of Finance and Ministry of Works.

The need to repay Shell and, by extension, the Government is why Bahamian businesses and large households face up to a 163 percent increase in the fuel charge component of their electricity bill in upcoming months during the peak summer consumption months. The increases are far higher than what persons would otherwise be paying based on current global oil prices.

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.