The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Standard & Poor’s (S&P) yesterday criticised the Government for taking “little action” to-date on essential energy reform, warning that this was imposing increasing “pressures” on the private sector via high costs and blackouts.

The Wall Street credit rating agency, in its full country assessment of the Bahamas, said that reforming the energy sector was “increasingly needed” given the burden it imposed on Bahamian households via ageing, inefficient plant and distribution grids.

“The PLP has taken little action on increasingly needed energy reform,” S&P said in its report. “At the end of 2013, the Government issued a request for proposal to restructure the Bahamas Electricity Corporation (BEC) into two separate companies - one for generation, and one for transmission and distribution.

“While it narrowed down the proposals to those submitted by five companies in early 2014, it has still made no decision on how to proceed.”

Pointing to the consequences, S&P added: “As of June 2014, BEC’s debt reached $214 million, which is the highest debt level out of all of the Bahamas’ public corporations.

“Energy in the Bahamas is very expensive, and households typically run significant arrears with BEC. It’s supplied via an old and unstable grid that suffers frequent planned and unplanned blackouts, and is reliant on (expensive) imported fuel oil.”

The Government and its defenders will likely brand S&P’s criticism as unfair, and suggest the rating agency should have waited just a few more weeks before making such a bold assertion.

This is because the Cabinet, and its ministerial sub-committee dealing with energy reform, are scheduled to decide this month - and possibly as early as this week - who the winning bidder for the BEC management contract will be.

S&P’s information appears slightly dated, as it does not account for the Deputy Prime Minister’s recent confirmation that BEC will no longer be broken up into two.

Instead, Mr Davis confirmed Tribune Business’s disclosure that the Government will now employ the Nassau Airport Development Company (NAD) model for BEC, relying on a private sector manager to come in an operate the Corporation while retaining 100 per cent equity ownership.

Some three contenders, believed to be Power Secure, Inter-Energy and China State Construction, were said to still be in the running for the BEC contract, with the Government promising it remained committed to reform.

However, there is little doubt that the BEC process has taken much longer than originally anticipated, and undergone several ‘twists and turns’ in terms of its objectives and structure since the August 2013 launch.

The toll exacted on the Bahamian economy and households by high energy costs, and an inefficient supply, has not escaped S&P’s attention, though.

“Concerns about sufficient energy supply have increased, particularly as Baha Mar is scheduled to come on line,” S&P said.

“The cost and availability of energy has been a long-standing complaint and impediment to the Bahamian tourism sector. Pressures have continued to rise this year with increased short-duration power outages.

“Additionally, given the size of Baha Mar and the energy it will require, the private sector is pushing for a broader, eco-friendly energy policy. Although the hotel [Baha Mar] plans to implement ocean thermal cooling in 2015 as an alternative energy source, we do not expect thermal cooling to cover all of the hotel’s energy needs.”

S&P added that relatively high energy costs were undermining both the tourism industry and wider economy’s global competitiveness.

“The Bahamas is a relatively high cost destination subject to competition from cheaper destinations. Many hotels, especially small ones, struggle financially,” S&P added.