The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is confident Power Secure International will “make a big difference” at the Bahamas Electricity Corporation (BEC), after finally informing the latter’s staff yesterday that the search for a management partner has ended.

Multiple sources confirmed Tribune Business’s revelations, dating back to January, that the Government had selected the US, Carolinas-based company as BEC’s operating partner once its integrity was absolutely guaranteed. It is understood to have been awarded a five-year management contract

The Christie administration’s long-awaited decision, which follows a 20-month bidding process, was described as “the end of the beginning” in resolving the Bahamas’ energy crisis, stabilising BEC and bringing relief to long-suffering residents and businesses.

However, this newspaper’s contacts warned that there was “still a long path to go down” to get BEC, a monopoly provider that is losing more than $20 million per year, to where it needs to be.

“The Government is pretty satisfied that they have the right philosophy and capability to make a big difference,” one government source, with knowledge of developments, said of Power Secure.

“The came in with a very competitive fee, which will be tied to incentives involving cost reduction and reliability improvement” targets.

Tribune Business was told that the next step in the process is for the Government to finalise the BEC management contract with Power Secure, and for the latter to actually enter the Corporation and get to grips with its multiple issues.

While the broad parameters of Power Secure’s contract have been agreed, Tribune Business understands that the fine details have yet to be settled. And while the company has already produced a comprehensive business plan for BEC, it needs to rapidly familiarise itself with the latest developments at the Corporation.

Tribune Business was told that Power Secure’s plan calls for “a substantial reduction” in the cost of electricity for Bahamian consumers, targeting a price in at least the $0.20 per kilowatt hour range - something that would represent anywhere from a 30-50 per cent reduction on BEC’s average tariff.

And, to deal with BEC’s supply reliability/outages woes, Power Secure is understood to be proposing to increase the Corporation’s generation capacity and install new equipment.

“The plan calls for them to very quickly install new equipment,” a government official, speaking on condition of anonymity, told Tribune Business.

All of which should give the Bahamian private sector and households hope that some relief might finally be in sight, following apparent government dithering over the BEC reform process that only exacerbated the energy crisis.

What appears to have taken the Christie administration ‘over the hump’, apart from public outrage over the latest spate of blackouts, are the guarantees it received from the Obama administration vouching for Power Secure’s integrity.

The issue, which was raised during the recent Jamaica summit attended by President Obama, resulted in a conference call last week involving Mr Christie and the US commerce secretary, Penny Pritzker. ‘Comfort letters’ vouching for Power Secure were subsequently sent by the US Commerce and Energy departments to Nassau.

The Government’s confirmation of Power Secure’ selection, which was effectively made several months ago, had been held up by concerns over two lawsuits - alleging securities fraud - that has been made against Power Secure.

However, extra comfort was obtained from the fact it is a New York Stock Exchange (NYSE) listed company, has recently “sold” $400 million in new business, and has been expanding its business with large power companies.

Paul Maynard, the Bahamas Electrical Workers Union (BEWU) president, confirmed that both his leadership team and that of the management union, met with Deputy Prime Minister Philip Davis yesterday morning.

Mr Davis, who was accompanied by his minister of state in the Ministry of Works, Arnold Forbes, informed BEC executives and staff of Power Secure’s selection as the management partner.

Mr Maynard declined to confirm Power Secure’s name, but pledged that the union would work with the company, sending the message that ‘anything was better than the current situation at BEC’.

“We’ll be able to work with it,” he told Tribune Business of the new arrangement. “We need to work with it because it can’t go on like this way. We have to. What’s going on now just can’t continue”.

Acknowledging that the union and its members would have to play a major role in the Corporation’s turnaround, Mr Maynard added: “It’s very important that BEC’s problems get fixed.

“First of all, we need our light bills to be reduced so the Bahamian people can comfortably pay them, and we need a reliable supply of electricity.

“We’re professionals. This is a very vexing problem. It’s very annoying to us because we’re professionals. Once everything is above board, we’re able to work with it and do what we have to do.”

Among the major criticisms of Power Secure’s selection is that it is a transmission and distribution specialist, when the bulk of BEC’s problems are on the generation side.

However, Tribune Business was told that Power Secure had “a substantial” engineering advisory and generations services group that managed/operated power stations in the US.

“They do manage more Mega Watts than in the Bahamas,” this newspaper was told. “They have really good reliability, performance metrics on that.”

The company’s generation consulting side is called Power Services, and Tribune Business was told that its emphasis on ‘managing’ fitted in perfectly with what the Government was seeking, as it will still retain 100 per cent ownership of BEC.

Power Secure also has a solar group, and specialises in micro grids - a model that the Government believes is well-suited to the Family Islands, where “huge savings” can be realised by improving grid efficiency.

“The Government’s view was that they [Power Secure] would add a lot of value to BEC,” one official, speaking on condition of anonymity, said. “They have very specific products within their overall business.

“They do a lot of work for Florida Power and Light and Georgia Power, strengthening their networks against hurricanes. That’s very relevant to the Bahamas.

“When you look at the whole thing, they bring a lot of value to the table and have a lot of strong supplier relationships to help BEC get a better deal on procurement.

“We’ll see in a couple of years’ time how it progresses, but it ticks 99 per cent of the Government’s boxes.”

BEC will be restructured along the same lines as the Nassau Airport Development Company (NAD) model, with the Government retaining 100 per cent ownership and Power Secure acting as the manager.

Tribune Business understands that BEC will have a new Board comprised of new directors, while plans to restructure its legacy debt and other liabilities will run in parallel to Power Secure’s work.

The Government’s advisers, KPMG, have already received proposals for placing a ‘rate reduction bond’ from a variety of investment banks. The Christie administration will then have to “pull the trigger” on the winning bidder to initiate this process.

A revised Electricity Act, which makes the Utilities Regulation and Competition Authority (URCA) the sector’s regulator, is also in circulation.