The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value’s owner fears there will still be “a long, hot summer” unless the Bahamas Electricity Corporation’s (BEC) new management partner can “work magic” on its supply reliability.

Rupert Roberts, while hailing Power Secure International’s selection as “music to the ears” of the private sector, suggested it would be virtually impossible for the Carolinas-based company to effect major improvements at BEC before year-end.

Suggesting that BEC needed an infusion of modern generation equipment, Mr Roberts nevertheless agreed that it would be “a joyful day” when both power outages were eliminated and his supermarket chain no longer faced $750,000 peak monthly bills.

“That’s music to our ears, but I don’t know what good it will do [in the short-term],” the Super Value president told Tribune Business of the Government’s decision to select Power Secure.

“I would still think it’s a long, hot summer. Without more equipment, and new equipment, I don’t know if the problem will be solved. We need to put more equipment in immediately, based on what I hear and read.”

Mr Roberts said he understood BEC required around 260 Mega Watts (MW) of generation capacity for when Baha Mar opened, but with turbines either off-line or down for maintenance, the current New Providence capacity was around 170-180 MW.

“We need relief right away,” the Super Value chief added. “It will be a joyful day when there’s continuous power. It’s expensive to buy and run generators.

“BEC can generate power on a scale of 100:1. It costs us 10 times as much to produce power. That’s not our forte. We’re doing it on a minimal scale. We get reduced costs and reliable service, it will be a big relief.”

Mr Roberts said that at the peak of last Monday’s power outages, around half his stores were operating on their generators at any one time.

Illustrating just how much BEC’s escalating energy prices have impacted the private sector, he added of Super Value’s history: “For the first 40 years we were in business, power was cheaper than rent.

“The last 10 years, rent was cheaper than power. It’s switched around. As BEC was becoming less efficient, the price of power - energy costs - were going up. You know it was a tipping point.”

Outside of the hotel industry, Super Value is among BEC’s biggest customers. Improved energy reliability, and reduced costs, should improve the Bahamas’ economic competitiveness - especially in those sectors such as tourism that compete directly with international rivals.

Private sector capital should be freed-up for job-creating investment and growth, while reduced energy bills will ease the burden on Bahamian households and free-up disposable income that boosts consumer demand and the economy.

The demands on the Bahamas’ foreign exchange reserves to finance oil imports will also likely, and the hope is that Power Secure can also help reduce this nation’s carbon footprint and BEC’s environmental liabilities.

Yet Mr Roberts was quick to acknowledge that Power Secure is unlikely to be a miracle worker, and any benefits from its management agreement will probably take time to materialise.

“I don’t see anything happening this year,” he told Tribune Business. “I don’t see anyone, however good they are, giving us efficient, reliable power at BEC immediately. I don’t see it unless they were to do some magic.

“Unless someone brings in a barge with a power plant on it, I don’t see any immediate relief. You may even have the possibility of a black Christmas.

“I don’t see any relief this summer. It’s going to take time. I don’t see any relief this year. I hope the new people have some magic, but I don’t see how.”

Tribune Business sources close to the process suggested the transition to Power Secure taking over 100 per cent management of BEC’s operations will likely take about four months.

While the broad parameters have been agreed, the Government and Power Secure still have to finalise the details of the latter’s five-year management contract.

BEC’s corporate set-up also has to be restructured along the lines established by the Nassau Airport Development Company (NAD) model, with new ownership and management entities created. The BEC Board, currently headed by executive chairman Leslie Miller, will also undergo radical changes in terms of its membership.

Tribune Business understands a Power Secure team will be arriving in the Bahamas within the week, in a bid to start closing the contract negotiations and understand the immediate requirements at BEC.

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.

Yet despite Power Secure managing US-based power stations in the US that, combined, generate more MW than the Bahamas requires, the criticism of its selection from some quarters has not died away.

Their argument is that Power Secure is a transmission and distribution specialist, when the bulk of BEC’s problems are on the generation side via its aged, inefficient and poorly-maintained turbine engines.

One source familiar with the BEC process likened Power Secure’s selection to a doctor’s dilemma over a patient suffering from a severed artery (power generation) and broken finger (transmission and distribution).

“You’re worried about the broken finger, and don’t fix the artery and the patient bleeds to death,” the source told Tribune Business. The Government’s initial RFP, released in August 2013, had called for BEC to be split into two entities - generation, and transmission and distribution.

While the latter would have remained 100 per cent government-owned, the RFP suggested an equity stake would be made available to the successful generation bidder, to be followed by an initial public offering (IPO). That, and the BEC ‘split’, were ultimately shelved in favour of the ‘NAD model’ and private sector manager.

“They still have to figure out what to do with generation,” the source said. “For whatever reason they [the Government] decided to go with this management company.

“What they wanted to do was pick the management company, and have the manager go out again with another new RFP for generation. Why in the world would you go out again when you’re under the gun you’re under?

“You’ve also got to wonder who would bid again. The Government dragged people through that bid experience for a year-and-a-half. I don’t know how that would fly.”

There is nothing to suggest, though, that Power Secure will be running a generation RFP. Tribune Business was told that its BEC business plan calls for it to rapidly install new generation equipment itself.

Other criticisms revolved around the length of Power Secure’s prospective contract. “How can you fix generation? You can’t fix generation under a five-year contract,” one source told Tribune Business.

However, one contact familiar with the process said: “There’s an almost automatic renewal if they perform. It gives them an incentive. It’s what happened with NAD.”