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Gov't Urged: End 'Ridiculous Foot Dragging' On Bec

Robert Myers

Robert Myers

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has been urged to end its “ridiculous foot dragging” over the Bahamas Electricity Corporation’s (BEC) part-privatisation and wider energy reform, as the private sector readies its own study on the issue.

Robert Myers, the Bahamas Chamber of Commerce and Employers Confederation’s (CCEC) chairman, told Tribune Business that he and other executives had urged Deputy Prime Minister Philip Davis “to get on with it as fast as possible” during a meeting held two weeks ago.

He said the BEC restructuring process should be the Government’s “number one priority”, adding that a successful outcome would be “a game changer” for the Bahamian economy and wider society.

The Chamber, and its Coalition for Responsible Taxation, are now increasingly pushing energy reform as part of their fiscal reform package, recognising that reduced power costs could more than offset any negative impact from Value-Added Tax (VAT).

The Government’s proposal that the successful BEC bidder(s) assume responsibility for refinancing the Corporation’s debt could also prove a fiscal masterstroke, given that it would clear around $350 million in sovereign debt.

And Mr Myers revealed that, following the model established over VAT and fiscal reform, the Chamber is conducting its own “independent” study into energy reform and the options available to the Bahamas.

Set for completion in two-three weeks, the BCCEC chairman told Tribune Business the research would assess likely cost savings from different fuel types that BEC could employ, plus their potential environmental impact.

Based on Mr Myers’s comments to this newspaper, the Chamber’s meeting with Mr Davis, who has Cabinet level responsibility for BEC, and Colin Higgs, permanent secretary at the Ministry of Works, was cordial but resulted in no firm commitments or disclosures from the Government side.

The BCCEC chairman said the private sector body wanted to take “a position” on energy reform, and asked for three things, the first being an update on the BEC restructuring process’s status.

Mr Davis responded by saying he would put the BCCEC in touch with the KPMG accounting firm, which has managed the BEC tender process on the Government’s behalf.

“We’re waiting for that to happen. That [the meeting] was two weeks ago, and it has not been arranged,” Mr Myers told Tribune Business.

“The second thing we asked is to let them put somebody from the Chamber that has knowledge of these type of issues on the [BEC] selection committee, so that we can be kept abreast of what’s going on.”

Mr Davis said he would consider this request, and Mr Myers added of the Chamber’s third suggestions: “We encouraged them to get on with it as fast as possible, because it has such a big impact on our costs of business and our GDP.

“Any savings would result in a massive improvement to everybody’s disposable income. They [Messrs Davis and Higgs] said ‘yes, we understand’, but they weren’t any more forthcoming than that.

“It seems like they were positive with regards to our involvement and discussions with KPMG, but nothing has happened to date.”

Apart from Mr Myers, the BCCEC was represented at the meeting by its chief executive, Edison Sumner; the head of its energy and environment committee, Melanie Roach; and Viana Gardiner, the Baha Mar executive who leads its trade and economic development group.

The BEC reform process, which proposes splitting the Corporation into two via separate generation and transmission/distribution businesses, was launched last August and is now some eight months behind the original schedule with no preferred bidders selected.

Five remaining bidders remain in contention, with four focusing on the generation side and just one on transmission and distribution. That is Carolina-based Power Secure, with the four generation bidders including the Caribbean Power Partners consortium, featuring Fluor Corporation and ProEnergy Services, and Cayman-based Inter-Energy. The remaining bidders are thought to include Genting and other Asian energy players.

Caribbean Power Partners, which spoke to Tribune Busines prior to the BEC process launch, had been offering to construct a $700 million, 300 Mega Watt (MW) power plant for New Providence.

Its principal, Texas-based Taylor Cheek, told this newspaper its proposal would cut BEC’s energy prices by 60 per cent, with a 75 per cent drop in the fuel charge and 33 per cent slash to the base rate.

Referring to such promises, Mr Myers told Tribune Business: “If we drop our power prices by that number, halve our electricity bills, that’s why it’s so critical.

“This is a massive game changer. I can’t emphasise enough how important and ridiculous it is for them to be dragging their feet on this. It should be the number one priority. It affects everybody’s bottom line.

“How much more do you have to talk about it? Pick somebody competent, somebody with a track record, and get on with it. It’s absolutely imperative. We must have energy reform.”

Mr Myers previously suggested that successful energy sector reform could cut this nation’s annual power bill by $500 million, and he reiterated that it could act as a counterweight to VAT and other tax increases.

“Imagine if you took that burden off,” the BCCEC chairman told Tribune Business. “People can take some of their power savings and shift it to tax. That’s why energy reform is in our VAT recommendations to the Government. It has to happen.”

Noting that it would take at least six-eight months for private sector expertise to have an impact on BEC, Mr Myers said completing the process would also “release debt for the Government”.

This is because the winning bidders will have to refinance BEC’s debt themselves, relieving the Government of its existing guarantees and obligations for an estimated $350 million. This, in turn, would have the effect of instantly reducing the national debt by that amount.

“You’re talking about hundreds of millions of dollars a year to start improving the economy,” Mr Myers told Tribune Business. “If BEC is sold and we get power prices down, and we get more efficiencies, there’s a whole bunch of disposable income that the Governnment can spend on debt servicing.”

The BCCEC has also not been idle in informing itself on the subject. “We’re looking to do an independent energy report, looking at the costs, and are hoping that can be done in the next two-three weeks,” Mr Myers said.

He added that it would assess the costs, and potential savings, from different fuel types such as Bunker C, diesel, liquefied natural gas (LNG) and compressed natural gas (CMG). The “pros and cons” of each, and their respective environmental impacts, will also be scrutinised.

The Government was initially supposed to select BEC’s preferred bidders by November 1 last year, but has yet to do that as the calendar enters July. Mr Davis recently promised a decision within the next several weeks.

Tribune Business understands that the work of KPMG, and the Government’s other advisers, DNV Kema and Hogan Lovells, is largely complete with their recommendations already submitted.

They are understood to be waiting for the Christie Cabinet to make a final decision on the matter. It appears likely that Cabinet’s recent agenda has been taken up with the Budget and web shop gaming regulation, and other competing matters seemingly include the new National Festival.

BEC bidders are understood to have adopted the attitude ‘call us when you need us’. And sources close to some of them have become increasingly pessimistic that a positive outcome will be achieved.

One suggested to Tribune Business that the process was starting to become reminiscent of the LNG plant situation, when three groups - AES Corporation, Tractebel and El Paso Corporation - all submitted plans to supply Florida from LNG plants in this nation.

The proposals spanned some eight years and three administrations but, with the Government saying neither ‘yes’ nor ‘no’, the LNG offers all eventually ‘died a death’ after it was dragged out long enough.

Another source expressed concern that politics and vested interests were also interfering with the BEC process.

Comments

birdiestrachan 6 years, 4 months ago

Did Mr. Myers have any say in the sale of BTC to CWC, and what about cable Bahamas? I am only asking. perhaps some one can say if he did.

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concerned799 6 years, 4 months ago

Why can't BEC be sold outright to a reputable utility like Fortis or Emera? (who run utilities all over the Caribbean)

It should be clear to all burning oil at $100/barrel (inefficiently too it must be added) with the tab going to the national debt is NOT sustainable. the longer the process drags on, the more the BEC debt is, and thus the less the government can sell it for.

Pre-clear a few bidders, and the highest bid wins....

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ThisIsOurs 6 years, 4 months ago

Pick somebody competent, somebody with a track record

Thats the crux of the matter, "competent" and "track record". Unfortunately, past decisions teach us that there is one major criteria, how much can my friends and I make out of this deal?

Renew Bahamas anyone?

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akbar 6 years, 3 months ago

I don't know what it is but it is like Grand Bahama is not a part of the Bahamas. A private company holds the monopoly there and the rates are ridiculously high, higher than NP. Privatization does very little unless there is an open market with serious competitors. All you really do is pass the monopoly from the government hands to one private entity hands (BTC as an example). The consumer is still stuck with non competitive rates and mediocre services with the serious downside being in our case, profits being funneled out of the country. If liberalization of the market cannot be accomplished then the whole exercise turns from privatization to re-monopolization.

There is a reality about alternate energy sources that Bahamians seem not to recognize. The present pursuit of alternate energy sources is not being done to replace oil with cheaper fuels, thus savings on the consumer part, it is being done to lessen the carbon footprint to help sustain our planet. All these so called alternate energy sources have there downside. The key is conservation of energy and pushing for the manufacturing and purchasing of more efficient energy consuming equipment.

Bahamian businesses are seeking short sighted goals. Yes the key is improving profitability, and cost of energy is a major factor, but let's not be blind to the long term effects that can happen to a rushed process. Legislation hasn't even been tabled to change the Electricity Act yet we taking on bidders. Wow it is amazing we expect to do everything blindly,throw up a pray and hope all works out well.

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killemwitdakno 6 years, 3 months ago

Bringing in shale gas should drastically cut the cost. What is the name of this reform? What type of power plant?

"The remaining bidders are thought to include Genting and other Asian energy players. "

Genting and Maylsia need to leave town. See what they did in Bimini. They are not environmentally progressive nor abide by our laws. Unethical.

PM and DAVIS already got upfront payment from BPC , that's why. Therefore they will surely get the rest if the backward deal completes. They could probably care less abut even finishing the term after that happens.

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