The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman yesterday said it was essential that the manager for the ‘new BEC’ be compensated via a ‘pay for performance’ management fee structure.

Gowon Bowe told Tribune Business that this should be a key principle in the Government’s agreement with PowerSecure and its operation of Bahamas Power & Light (BPL).

He said: “If we step back and look at a Power Secure, certainly the first thing you would want to see is that their management fee structure is very closely tied to their ability to generate specific revenues and achieve specific profits.

“Usually, that has two components. It has a base component that says they are paid a minimal amount on an annual basis and, typically,  a variable component that says based on whether it be revenues or profitability, there is an additional payment.”

Mr Bowe added: “What we would want to see coming out of a PowerSecure deal, and I cannot imagine any other principle, is a pay for performance. Whatever their fee structure is, it is going to be tied to whatever financial benchmarks you have to meet.

“While we have to pay for the services they provide, given that they are being paid to be a manager; not a generator of power, not a distributor but being paid to manage those functions, then they should only be compensated at a level commensurate with the level of performance they are actually achieving.”    

Simon Townend, KPMG Corporate Finance (Bahamas) managing director, and a key advisor on the energy reform process, said last week that system reliability and low-cost fuel sourcing would also be important benchmarks for BPL’s new operator.

Addressing a Bahamas Institute of Chartered Accountants (BICA) seminar, Mr Townend said there were several targets outlined in PowerSecure’s business plan, including fuel hedging strategies, the frequency of outages, customer satisfaction and debt collections.

He added that the Government and PowerSecure were still working on finalising the five-year management services agreement, which should conclude shortly.

“When the time comes for the management aspect, I fully expect that as a public corporation owned by the Government, their financial statements would have to be tabled; hopefully that their whole management processes are more efficient and the tabling of financial statements should be done in a more timely manner,” said Mr Bowe.

“Audited financial statements,  by definition because of the accounting rules, would have to clearly articulate what any management fee structure is.”