The Tribune

• Pintard: Interest and terms not worked out

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Opposition’s leader yesterday asserted he has wrung “a huge admission” from the Government that it loaned Bahamas Power & Light (BPL) some $110m without first agreeing the interest rate and terms.

Michael Pintard told Tribune Business that the House of Assembly confirmation by Jobeth Coleby-Davis, minister of transport and energy, represented “the first time on the public record” that the Davis administration has conceded that the nine-figure sum was advanced without the normal lending pre-conditions being in place.

Mrs Coleby-Davis, replying to the FNM leader’s BPL-related questions, acknowledged that the interest rate and terms for a loan made around 12 months ago to help the energy provider cover its under-funded fuel bills are still being worked out.

“Madam Speaker, in response to the honourable member’s inquiry, I wish to make clear that BPL was granted a $110m loan by the Government to address the under-recovery of fuel costs as a result of the COVID-19 pandemic.

“The specifics of this loan, including the terms and interest rates, are in the process of being finalised. During the pandemic, to alleviate financial strain on our customers, BPL charged a reduced rate for fuel costs, absorbing the difference and deferring essential capital projects.

“Subsequently, through a ‘glide path’ fuel recovery strategy, we have been able to recover a significant portion of the under-recovered amount allowing us to resume and fund critical infrastructure projects.”

Mr Pintard, immediately following-up on this answer, asked: “Is it customary for the central government to provide to an agency of the Government, such as BPL, a loan without having worked out in advance the terms of that of that loan?”. Mrs Coleby-Davis, though, deferred her response and said she would answer this question at a later date.

The Opposition leader, speaking subsequently to Tribune Business, revealed that the Prime Minister had also confirmed in written correspondence with himself that the interest rate to be charged on the $110m BPL loan and other associated terms were still being finalised.

“The Prime Minister has written to me already acknowledging the terms were not worked out which is why I suspect she said in the House of Assembly that the terms have not settled,” Mr Pintard said of Mrs Coleby-Davis’ answers.

“It is a huge admission. They have entered into a loan agreement without working out the terms... Again, this issue you will recall, they never acknowledged they gave a loan.” The $110m loan was first disclosed in the Ministry of Finance’s public debt statistical bulletin for the three months to end-March 2023, and reported on by Tribune Business at the time.

Simon Wilson, the Ministry of Finance’s financial secretary, at the time confirmed that the $80m increase in government loans to state-owned enterprises (SOEs) and agencies for that quarter, and $110m jump over the previous nine months, was to enable BPL to pay off past-due and out- standing debts to its fuel supplier, Shell.

“Once we found out they had issued a loan, they were forced to fess up it was to BPL,” Mr Pintard said yesterday. “Now the argument is that BPL had needs, and they addressed those needs to ensure it could continue to supply customers. It’s unfortunate they didn’t see the need to comply with the law and explain to the public why they are executing business the way they are....

“This is the first time on the public record that they have said they did not know the terms. They have not yet worked out the terms. Both she and the Prime Minister are on record as saying the terms have not yet been worked out.”

In any event, multiple sources have argued that the Government is barred from directly subsidising BPL’s fuel costs by the Bahamas Electricity Corporation (Amendment) Regulations 2020, which were gazetted on June 26 that year to facilitate the hedging strategy implemented by the former Minnis administration.

They pointed out that the first two clauses in ‘Part B: Fuel Adjustment Charge’ stipulate that this “shall be the total cost of fuel required to produce and deliver each kilowatt hour of electricity to consumers”. The use of the word “shall”, they argue, means that the full cost must be passed to business and residential consumers and not subsidised in part by the Government.

Meanwhile, Mrs Coleby- Davis was also economical with her explanation as to why the $110m loan to BPL was required, and why the state-owned energy provider had failed to fully recover a fuel bill that, by law, is supposed to be fully passed through directly to consumers who have to pay 100 percent of the associated costs.

The minister sought to blame this on the COVID-19 pandemic, and the Government’s deci- sion to reduce the energy cost burden on struggling Bahamian households and businesses by not fully pass- ing the fuel charge on to consumers, implying that BPL absorbed a portion itself and did not recover the full amount. Hence the need ultimately for the $110m loan issued by the Davis administration.

However, Mr Pintard branded this as “a disingenuous answer”, and argued that Mrs Coleby-Davis would likely have been fully aware that the BPL fuel cost “under-recovery” she referred to was a direct result of the Davis administration’s decision not to acquire more cut-price oil to maintain the utility’s hedging initiative and relatively low rates.

With BPL subsequently forced to purchase more oil at higher spot market prices, the Government elected to hold its fuel

charge constant at the 10.5 cents per kilowatt hour (KWh) rate set by the initial hedge rather than let it rise to cover the higher costs.

This, in turn, led to BPL’s rising “under-recovered” fuel bill and ultimately necessitated the $110m financial support from the Government. Bahamian businesses and households then had to help pay back the $110m loan via up to 163 percent hikes in BPL’s fuel charge, compared to October 2021 rates, over the past 14 months.

Mrs Coleby-Davis yesterday deferred to Prime Minister Philip Davis KC, in his capacity as minister of finance, when Mr Pintard asked her to acknowledge that “the loan provided to BPL must be accounted for within the approved budgetary appropriations authorised by Parliament, as required by the Public Debt Management Act and the constitution”.

“Madam Speaker, as the minister of energy and transport, I acknowledge the importance of adhering to the Public Debt Management Act and the constitution and managing public finances,” the minister said. “However, matters pertaining to the accounting and budgetary

appropriations of the loan provided to BPL are under the jurisdiction of the Ministry of Finance.”

Mr Pintard then sought to obtain the required information from Mr Davis, who was present in the House of Assembly, but he was shielded by the House of Assembly speaker, Patricia Deveaux, who said the questions had to “be placed on further notices” since they had not been tabled and the Prime Minister was likely unprepared to answer them.

Undeterred, Mr Pintard pressed on to ask how the Government plans to account for the $110m BPL loan in the public finances. Mr Coleby-Davis again deferred to the Prime Minister and Ministry of Finance, while reassuring she was “fully committed to ensuring transparency and accountability in all public matters”.

Mr Davis told the speaker he would “defer to your assessment” that he was not ready to answer questions, leading Mr Pintard to say: “If it was a court of law, I would have said you are leading the witness, Madam Speaker, but as we are not I’ll only rely on the court of public opinion.”