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Bpl Chief Deflects To Govt On $650m Bond Refinancing

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Bahamas Power & Light’s (BPL) chief executive yesterday offered little on the status of the rate reduction bond (RRB) issue that is key to the cash-strapped utility’s turnaround, but expressed confidence it would receive the necessary attention.

Pamela Hill effectively implied that the RRB, and the refinancing of BPL’s legacy $650 million debt and assorted liabilities, was the Government’s responsibility.

When asked about the bond issue yesterday, Ms Hill responded: “In some ways I almost don’t envy what it’s like to have to be someone that runs so many moving parts, because there is not only BPL that finds itself in need, but there are many other requirements that it takes to successfully run a country.

“I know that the Government is evaluating our needs, the investment that is required to help ensure that the economy of the Bahamas is strong today and tomorrow.

“They’re also looking at the credit strength of the country and the other requirements that the people of the Bahamas need, and investors need. I’m certain that they continue to pay the proper attention to that and give it the attention it needs.”

Cash-strapped BPL and its manager, PowerSecure, are unable to implement their plans for turning around the struggling energy monopoly until its existing bank debt and bond, plus pension and environmental liabilities, are refinanced.

This will be achieved by the issuance of a rate reduction bond (RRB) to investors, which is intended to both repay BEC’s legacy debts and move the new ones off its - and the Government’s - balance sheet.

“The entire business plan for BPL is somewhat depending on the bond,” one source intimately familiar with the proposed financial restructuring, and speaking on condition of anonymity, told Tribune Business

However, Tribune Business sources have suggested that the RRB may not be placed with local and international capital markets investors until 2018 - further hindering efforts to save BPL.

This newspaper was told that the delays are tied to efforts to obtain a ‘rating’ for the RRB from international credit rating agencies - something essential to fostering investor confidence in the bonds it will issue, and in obtaining the best possible price (interest) rate from the markets.

Tribune Business understands that the rating agencies want the special purpose vehicle (SPV) that will issue the bonds to establish some credibility/history behind it before they will rate it.

Establishing such credibility will, crucially, require the SPV to collect the portion of customer tariffs assigned to it to service repayment of the interest to investors.

To ‘bridge the gap’ between now and the RRB issue, the Government, together with BPL’s Board and PowerSecure, are understood to be in talks with CIBC FirstCaribbean International Bank and Credit Suisse to obtain a ‘bridge financing’ facility to ensure the utility has sufficient capital prior to the RRB’s placement.

The two named institutions are understood to be the front-runners to place the RRB, which was created by legislation passed by Parliament as part of efforts to reform the Bahamian energy sector.

Tribune Business sources, speaking on condition of anonymity, said BPL is seeking $250 million in ‘bridge financing’, but that CIBC and Credit Suisse were currently only prepared to extend $75 million.

Although that latter figure might be increased based on certain terms and conditions, this newspaper was made to understand it will come nowhere near BPL’s target $250 million.

As for the cost associated with BPL’s Hurricane Matthew restoration efforts, Ms Hill said it had been “an enormous challenge for our fellow Bahamians, and certainly right here at BPL”.

She added: “I’m very proud of my folks and the fact that we were able to bring folks back on within a three-week period.

“I would say that as far as the cost is concerned we are still tabulating. We continue to bring in the third party experts on that in order to make sure that we will be in a very strong position as we submit the necessary paperwork for the claim, because we do insure our power plants and our assets.”

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