The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The company taking over New Providence’s electricity grid appears to be valuing it at more than double the Government’s price in an offering document promoting its new $100m bond issue.

Bahamas Grid Company, the newly-formed entity charged with controlling and overhauling the island’s transmission and distribution (T&D) infrastructure, has placed a $220m valuation on its property, plant and equipment (PPE) assets during its first year in existence according to the bond offering’s private placement memorandum (PPM).

That valuation is 120 percent higher, or more than double, the $100m “book valuation” placed on the New Providence energy grid assets being transferred to Bahamas Grid Company by the Government and Bahamas Power & Light (BPL). Given that Bahamas Grid Company has just been incorporated, it is almost certain that most - if not all - its PPE assets will be those it is inheriting from BPL.

Michael Pintard, the Opposition’s leader, last night told this newspaper that he and his party “are very much concerned” about the discrepancy between the PPM valuation and that provided by the Government and BPL. He added that it reinforced their concerns that the Government was engaged in “a giveaway” of BPL assets, which are ultimately owned by the Bahamian people, as part of its energy reform drive.

Jobeth Coleby-Davis, minister of energy and transport, is according to her social media pages on vacation and could not be reached for comment. However, the Bahamas Grid Company bond offering document, a copy of which has been obtained by Tribune Business, confirmed the $100m “book valuation” placed on the New Providence energy grid assets that are being transferred to majority private investor control.

“Bahamas Grid Company will be a 40 percent BPL/government, 60 percent private partnership,” the $100m bond offering document stipulates. “For 40 percent of the company [Bahamas Grid Company] ownership, BPL and the Governmen will contribute the existing New Providence T&D System, which BPL has assigned a value of approximately $100m along with its related facilities, properties and equipment,” it said.

“The 60 percent private contribution will come from a mix of debt and equity investors funding the foundational upgrades, as well as the partnership raising the financing and leading the T&D upgrade and maintenance work.”

The $220m valuation attached to Bahamas Grid Company’s property, plant and equipment assets, which will likely include substations, transformers, poles and overhead wires, accounts for 90.6 percent of its projected total assets during its first year of operations.

“We always argued that the transmission and distribution was much further north of what the Government listed as book value,” Mr Pintard argued. “Our position has not changed with regard to that. We would not at all be surprised at what their internal documents would say versus what the value floated in advance by the Government as the book value for infrastructure is.

“We’re not at all surprised that there would be this great appreciation..... We don’t find it at all surprising, the figures. We felt the Government intentionally declared the PPE value in advance of this deal in order to permit this company coming in with a small amount of money from these investors to transform the transmission and distribution infrastructure.

“They allowed these investors to come in at $30m by devaluing the assets. Now, all of a sudden, they are seeking to amplify or in a substantial way raise the value of these assets to better support the company to execute the agreements it needs to raise the capital on the front end while getting way beyond what they stated.”

Mr Pintard said Bahamas Grid Company and its private shareholders/investors are now leveraging the assets set to be transferred to their majority 60 percent control by BPL and the Government through using them as security for debt financing. 

The bond offering document also reveals that Bahamas Grid Company fully raised its $30m equity financing by end-June 2024, and the Opposition leader urged that the identity of these shareholders/investors be disclosed publicly. “$30m in equity was raised in the 2024 second quarter,” the document said. “The equity contribution was completed in June 2024.”

“The Government, since they have single-sourced this, they should be very transparent in identifying who put up the $30m for Bahamas Grid Company. Who are the shareholders for this majority 60 percent? That would be useful to know,” Mr Pintard told Tribune Business.

Bahamas Grid Company’s ownership split has already aroused controversy given that the Government/BPL are getting the minority interest despite seemingly contributing more via the $100m “book valuation” of New Providence grid assets. By contrast, the private investors are gaining a collective 60 percent majority stake via just a $30m equity investment.

Equity means that investors are contributing their own money to a project. However, several Cabinet ministers have valued the private sector’s 60 percent at $130m by adding the $100m bond raise to the $30m equity capital. Given that bonds are a form of debt, since capital is being borrowed from investors and lenders, several sources have privately told this newspaper the $100m cannot be treated as equity.

As a result, they have suggested that the Government/BPL interest is really $20m, not $100m, so as to produce the 40/60 ownership split at Bahamas Grid Company in favour of the private sector. “Our view has not changed on this subject one iota,” Mr Pintard added, “when we raised the lack of transparency and competitive bidding by the Government. We’re most disappointed in how they’re proceeding.”

The $100m Bahamas Grid Company bond issue will carry an 8 percent interest rate coupon, with dividends paid semi-annually in January and July every year until they finally mature - and the principal becomes due for repayment - in some 20 years’ time on July 31, 2044.

The first interest payment is due on January 31, 2026, and Bahamas Grid Company cannot redeem the bonds for seven years or 84 months. The funds raised will account for the majority of the $130m New Providence electricity grid’s initial overhaul, which is targeted for completion in the 2025 second quarter provided work begins now.

Some $58m and $55m will be invested in transmission and substations, respectively, with a further $7m allocated to distribution upgrades and $5m to each of engineering and training and education. “The New Providence T&D public-private partnership (PPP) will be structured as a new organisation working alongside and in partnership with BPL to serve utility customers in the Bahamas,” the bond document said.

“BPL will continue to maintain customer relationships and billing, as well as its owned power generation assets. To ensure that the electricity cost in The Bahamas will continue to become more affordable as time goes on, each organisation will use best efforts to limit costs on a going forward basis and collect revenues accordingly.”

Bahamas Grid Company is forecasting that it will earn $75.161m in revenue annually from receiving 5.5 cents per kilowatt hour (KWh) from all customer billings during the first five years. This is scheduled to fall to 4.8 cents per KWh “provided certain demand hurdles are achieved over the next 25 years in accordance with the waterfall payment schedule in the Heads of Agreement”.

The Heads of Agreement remains to be negotiated and agreed with the Davis administration, but it will feature a 25-year agreement for Bahamas Grid Company to overhaul and manage New Providence’s electricity grid with an option to extend for ten years that would ultimately take this to 35.