The Tribune

• Utility’s liabilities, capital need each $500m

• Ex-Chamber chairman: ‘100% privatise it’

• Calls for up to 40% IPO if done correctly

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government must not allow Bahamas Power & Light’s (BPL) “dire” billion-dollar needs to trap it into an energy reform “rush job”, a former Chamber of Commerce head urged yesterday.

Robert Myers, the Windsor Lakes developer, told Tribune Business that “everybody wins” if the Davis administration gets its planned restructuring right as he called for Bahamian investors to gain up to 40 percent equity ownership in a privatised BPL via a stock market listing.

Arguing that the Government should “100 percent privatise it”, and that this is “definitely the way to go” to secure both BPL and the wider economy’s future the prominent businessman said The Bahamas’ energy prices are “almost triple the costs” faced by most US states and have “unnecessarily” deprived households and businesses of “billions of dollars over the last three years”.

Mr Myers spoke out as JoBeth Coleby-Davis, minister of transport and energy, revealed to the House of Assembly that BPL’s financial needs total $1bn evenly split between its legacy debts/liabilities and current capital investment needs.

“Mr deputy speaker, BPL has over $500m in debt. Yes, that’s right, over half-a-billion dollars and counting,” she confirmed. “It owes banks, it owes the Government and its employees’ pensions are underfunded by $120m. You heard me right. The employees’ pension [fund] is underfunded by $120m. Big change is needed.”

Mrs Coleby-Davis did not break down the $500m, which appears to represent total liabilities and not just debt, beyond the $120m employee pension fund deficit. The reference to “owes the Government” likely means the $184m debt, disclosed in the latest quarterly debt statistical burden, that represents the loan/subsidy provided to BPL to cover its fuel purchase costs after hedging trades were not executed.

The minister, though, provided more details on BPL’s capital investment needs which she also pegged at $500m or half- a-billion dollars. “BPL operates 29 power stations on 17 islands. Over the next five years, BPL will need an investment of over $500m to upgrade its infrastructure,” Mrs Coleby-Davis said.

This, she added, was broken down into a collective $300m investment in new generation assets spread across New Providence and the Family Islands; $130m to upgrade New Providence’s transmission and distribution

network “in the next two years alone”; $35m for the roll-out of advanced metering infrastructure (AMI); and $70m in undefined “other costs”.

“Today, to fix, BPL we need over $500m to address its debts and over $500m to upgrade and improve its aged and deteriorated infrastructure. Mr deputy speaker, that’s over $1bn,” Mrs Coleby-Davis said. However, the Government gave no further specifics on the proposed public private partnerships (PPPs) it is negotiating to get private sector management and investment into BPL to reform its operations.

Mr Myers, who yesterday argued that the Government would be better off fully privatising BPL by selling off its assets and operations to private purchasers, suggested Bahamian investors would likely be willing to “buy into” the utility once convinced its financial and operational performance was being turned around under the chosen management partners.

“The people should have the right to buy into the utility,” he told this newspaper. “Some of that should be listed on the stock exchange (BISX). At least 30 percent should go to the market. I would have thought at least 30-40 percent would be good. If they get the right management group in I’m sure people will buy in, but they will only buy into it like that with the correct management.”

Asserting that solar and renewable energy forms should account “for at least 25 percent at a minimum” of BPL’s power generation needs, Mr Myers said of BPL and wider energy reform: “There’s plenty of money to be made and we can do it fairly where everybody wins. Consumers will pay less, and it will be better managed and more reliable.

“It’s critical it’s not a rush job because it’s [BPL] $1bn in debt, but we do the process and mandate that certain things happen. Privatisation is definitely the way to go if it’s done properly. It should be positive for everybody, and provide opportunities for Bahamians to invest. I would certainly invest in that if it was the right group, was managed properly and the Government did not have an overriding say.”

Mr Myers voiced concern over how the Government has handled the BPL PPP process, given the seeming absence of a competitive bidding process and public tendering to attract all possible offers. “You’ve got to do a proper bidding process,” he added. “I don’t know any of the conditions for this thing. I didn’t even know they were going out for a PPP.”

The Bahamas’ national energy policy commits this nation to source 30 percent of its generation needs from solar and other renewable sources by 2030. “For sure, the cost of electricity is a massive burden to the Government, every single household and business in the country,” Mr Myers told Tribune Business.

“At almost triple the cost of most US states, electricity has eroded significant amounts of disposable income for all citizens and reduced the profits of all companies. BPL is an SOE (state-owned enterprise) whose inefficient generation and transmission has unnecessarily cost the Bahamian people billions of dollars over the last 30 years.

“Whatever PPP the Government is considering must be of benefit to the people and not just the shareholders of the new proposed entity. It should not leave the Government with related debt. The power price to the people should be strictly regulated, and tied to the cost of the most efficient price of oil with future solar photovoltaic (PV) prices built in,” he continued.

“It should consider more efficient modern means of power supply in the Family islands and, last but not least, it should be of a far higher quality than what is being provided currently.” Rupert Roberts, Super Value’s principal, yesterday voiced fears that BPL’s $1bn financial hole will force power bills to increase despite Mrs Coleby-Davis’ pledge that they will start to “gradually” decline by July 2024.

“The power rates have to go down,” he argued. “They can’t go up. We can’t stand for them to go up. The consumer can’t stand that. I don’t see how they can talk all this money and say it can be reduced. We’re hoping they’re right and there’s going to be a reduction.

Mr Roberts said cheaper, more reliable and cleaner energy “is extremely important”, especially for food store chains such as Super Value which, alongside sectors such as the hotel industry, are among BPL’s biggest customers.

Super Value’s energy costs would have increased to more than $1m per month when BPL’s fuel charge glide path peaked at a 163 percent rise over October 2022 levels last summer, had it not been for its chain-wide solar energy roll-out which contained the hike to around 40 percent.

“We’ve completed the first half,” Mr Roberts said of Super Value’s solar installation. “We have to do the adjustments on the inverters to get them to maximum capacity and see what additional space we have on the roof. If that’s not enough we have to consider do we put it somewhere there’s space, like big parking lots where people can park underneath it.

“Paying the 163 percent increase, that would have put us over $1m a month. Payroll used to be our number one [cost], rent used to be our number two and then power. Now, it’s payroll, power and then rent. Power was always number three, and came to number two.”

Despite the ever-escalating cost pressures, Mr Roberts said he had instructed Super Value buyers not to pass this on to shoppers. “I told the buyers that if they were making 23 percent on items, and costs go up, reduce it [the mark- up] to 20 percent and we’re going to have to make it up on volume,” he added.

Robert Sands, the Bahamas Hotel and Tourism Association’s (BHTA) pres- ident, told Tribune Business that calls for cheaper, more reliable and cleaner energy were akin to “preaching to the choir” where the resort industry was concerned.

“Reliable, affordable, consistent electricity, that has always been our position,” he added, “and certainly clean electricity as well.” Mr Sands said energy costs have always been the resort industry’s greatest expense behind labour, and added: “I think the issue, while important for New Providence, which is the centre of tourism, the Family Islands don’t have the same reliability that we do.

“It’s more disruptive to them in the Family Islands, and we’ve certainly been agitating and advocating in the Family Islands for this matter to be addressed.”