Published On:Friday, March 19, 2010

By NEIL HARTNELL

Tribune Business Editor

The Government yesterday confirmed that a major shareholder in Grand Bahama Power Company will conduct a 60-day review of the Bahamas Electricity Corporation (BEC) starting next month, with the aim of implementing recommendations to set the state-owned utility back on a more secure financial footing.

Dr Earl Deveaux, minister of the environment, confirmed Tribune Business's suspicions that Canadian power giant Emera, which holds a 25 per cent equity stake in Grand Bahama Power Company through its 50 per cent position in BISX-listed ICD Utilities, had reached agreement with the Government to conduct the next-stage review of BEC.

"It is my job to be concerned with BEC's energy future, and the Government has consummated at arrangement with Emera to look at BEC," Dr Deveaux told Tribune Business. "We hope that will start early next month. It is my hope that their review will take 60 days."

Emera will effectively look "at the practical side" of the review conducted by German consultants Fichtner, which was funded by the Inter-American Development Bank (IDB). The Canadian utility's role will be to look at how the recommendations can be best implemented.

Among the considerations Emera would assess was the "use of different types of fuel in generation plants to get the best possible results", Dr Deveaux explained, a concept it is very familiar with in its power plants and generating capacity in the US and Canada.

This involved the "use of whatever source of fuel is cheaper to give customers the best price", the minister said, with Emera also likely to "look at hedging strategies" in the Bahamian context.

"Broadly speaking, [the Emera review] will look at the price of fuel sources, so that we can have a long-term reduction in the cost of providing electricity, distribution, generation capacity and the mix," Dr Deveaux told Tribune Business.

Other issues up for examination are likely to be maintenance and supply chain management.

Emera gained its 50 per cent ICD Utilities stake via the $41 million purchase of Lady Henrietta St George's interest in late 2008, and has long stated its interest in being involved in any BEC privatisation or consulting work. Tribune Business reported on Monday that it was the likely winner of the next BEC consultancy.

Among the recommendations made by Fichtner were that the Government, rather than BEC and, by extension, its business and residential consumers, pay for the provision of street lighting and lighting in other public places, including parks - something estimated to cost between $12-$15 million per year.

This, Dr Deveaux explained previously, will feed into a wider tariff-rebalancing exercise at BEC, with the Corporation seeking to segment its 96,000-strong customer base by user type and consumption rate.

A "system-wide review" of BEC's electricity losses will also take place, given that just a 1 per cent reduction in the amount of power lost before reaching the end-user could improve the Corporation's bottom line by $3 million.

"If we look at the demand for power in New Providence and the Family Islands over the next 10 years, it's going to require [an investment by BEC] of $300 million-$500 million," Dr Deveaux said earlier this week. "We're spending right now, according to the financial statements, just over $400 million in energy savings.

"To achieve a modest amount of savings in areas I have indicated should be able to free up anywhere between $90-$175 million, which would be available for use elsewhere, including investments in new generating plants. That speaks to households, businesses and BEC working towards energy savings.

"That's the kind of future and opportunity we have. You can imagine what kind of flexibility that gives us potentially, given that money is tight."

After losing $21.225 million in 2007 and $16.015 million in 2008, BEC's losses for the fiscal year ended on September 30, 2009, Tribune Business understands, have again breached the $20 million mark.

The cash-strapped Corporation, which has more than $100 million in accounts receivables and some $199 million in accounts payables, also needed the Government to guarantee a $211 million refinancing of a previous syndicated loan. This indicates that BEC may well soon be added to the Corporations needing annual taxpayer support, a major problem at a time when the public finances are already stretched.