By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Enabling private investors to acquire majority control of New Providence’s electricity grid for just an initial $30m equity capital investment has been branded “a hell of a deal” by the Opposition’s chairman.
Dr Duane Sands told Tribune Business that the terms of the Davis administration’s minimum 25-year agreement with Bahamas Grid Company, the entity into which New Providence’s transmission and distribution is being transferred, represented “quite a bargain” for the institutional investors and high net worth individuals who are being invited to buy-in using their own monies.
“That’s a hell of a deal,” he asserted. “You get a whole national energy grid for $30m. That’s a hell of a deal, hell of a deal - a majority interest in the national electricity grid for $30m. When you talk about a bargain, that’s quite a bargain. You also get to set the terms of the preference shares, those common shares. You’re going to be selecting the Board members.”
Branding the Government’s energy reform plans as “Bluewater 2.0”, a reference to the first Christie administration’s failed effort to privatise the Bahamas Telecommunications Company (BTC) towards the end of its first term in office, Dr Sands added: “It’s fascinating that with such a critical transaction for the country they would deem it reasonable to take this approach....
“It’s an unfortunate scenario that they are trying to justify the transaction as somehow reasonable, as somehow necessary in the fashion that has been chosen. The more they explain it, it’s a national steal. I think that we should all protest nationally at the concept they are demonstrating, allied to nebulous language, for what is a single preferred vendor or contractor.”
Much of the concerns and criticisms have focused on the Government’s admission that “single source”, rather than competitive, bidding was used to select Bahamas Utility Company, the fully-owned subsidiary of BISX-listed FOCOL Holdings, as the New Providence generator with responsibility to construct a new 177 Mega Watt (MW) LNG fuelled power plant at Blue Hills by 2026.
Similar procurement methods appear to have resulted in the Bahamas Grid Company structure and selection of Island Grid/Pike. Dr Sands said it was impossible, given the absence of competitive bidding that would see multiple offers compete to be selected on the same terms, to know if Bahamians are getting the best possible price and best energy reform deal.
“We can’t tell,” he said. “We have no idea. There’s been no transparency, there’s been no competitive bidding. We don’t know how they arrived at this particular company and strategic partner. Who knows if someone could have done one-third of that award, half of that award. We have to trust this administration and take them on their word. We don’t have any other bids to compare.
“Without competitive bidding we have no idea whether or not the best terms have been chosen, whether or not the best price point has been chosen, whether or not the timeline is most efficient, whether or not the mix of options is up-to-date and best practice. There are so many unknowns.”
Bahamas Grid Company will be managed by Island Grid, a Lyford Cay-based firm whose co-chief executive, Eric Pike, also chairs the North Carolina-based Pike Corporation. That is the entity from whom Island Grid and Bahamas Grid Company will procure the manpower and other resources required to transform New Providence’s energy grid and enable it to meet future demand and deliver more consistent supply.
Tribune Business source, speaking on condition of anonymity, said Bahamas Grid Company is forecasting that it will generate average annual profits of around $20m during its first five years. And Island Grid’s management fee is around $4.5m per annum.
However, BPL’s New Providence energy grid may not be as valuable as some think. Prime Minister Philip Davis KC has repeatedly said some parts are on “the verge of collapse”, with parts 50 years or more older and dating before The Bahamas gained its independence. Therefore, sections may be obsolete and past their useful life, requiring them to be written-off as having zero value.
The Government will also likely argue that handing majority control of the transmission and distribution network to private investors for a minimum 25 years, with an option to renew for ten, is the only way to mobilise sufficient private sector capital to finance the initial $130m outlay and then some given that neither BPL nor the Public Treasury have the necessary funding required.
Jobeth Coleby-Davis, minister of energy and transport, during her 2024-2025 Budget debate contribution in the House of Assembly, said Island Grid/Pike were chosen as the grid partner because of the latter’s ability “to secure long lead items within six to nine months that would traditionally take up to two years” and finance these by putting up $25m in cash immediately to ensure they arrive before year-end 2024.
“Island Grid has committed to complete most of the initial $130m upgrade by the end of June 2025,” the minister added. “BPL and the Government have entered a joint venture partnership with Island Grid Solutions where a special purpose vehicle (SPV), Bahamas Grid Company, has been created for the purpose of facilitating the joint venture partnership.
“BPL will contribute the book value of its New Providence transmission and distribution assets, valued at $100m in exchange for 40 percent of the shares in the SPV and Island Grid as the transmission and distribution manager will raise and contribute through private investors $130m to the SPV in exchange for 60 percent of shares.
“It is anticipated that 85 to 90 percent of the SPV will be owned by Bahamian companies and pension funds with BPL owning 40 percent as I stated earlier.” Dr Sands, though, branded the minister’s attempt to justify “single source” bidding on both key contracts as “laughable, really laughable”.
He added: “I read the Chamber of Commerce statement, which said it’s anticipated that, for most businesses in the country, the cost of energy is going to increase. What that says to me is the cost of living in The Bahamas is going to increase since most businesses provide goods and services using energy to the Bahamian public. There are very few companies that have the ability to insulate their prices from the cost of electricity.”
Dr Sands was referring to the new BPL tariff structure, the Equity Rate Adjustment, that is designed to reduce costs for the most vulnerable households and low-energy residential users. However, under the former Minnis administration’s plans, energy costs were also set to rise slightly in the first few years until the full benefits of LNG kicked-in.
Comments
ExposedU2C 2 months, 3 weeks ago
This most corrupt privatisation of nation's entire energy sector will need to be quickly undone by the next government as it wreaks to high heaven of outright corruption of the worst possible kind.
Bahamians and their businesses (even the wealthier ones) will not be able to afford electricity under an arrangement that effectively gives the greedy Snake and his local and foreign cronies the absolute power to set electricity rates with no oversight whatsoever by URCA and with a corrupt and daft minister of transport and energy (Jobeth Davis) all too willing to rubber stamp whatever the greedy crooks want to do.
birdiestrachan 2 months, 3 weeks ago
We remember the Fnm papa who said Bahamians need not apply to buy BTC ,we remember the shipping port the cruise port, and the post office which is worse .? Were those people crooks,
ExposedU2C 2 months, 3 weeks ago
Refreshing to have you supporting and proving my point with the examples you have provided.
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