The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

PowerSecure has promised its “dedication and commitment” to BEC remains unchanged in the wake of its $431 million purchase, as Opposition politicians urged: “We need the ‘A Team’, not the ‘B Team’.”

John Bluth, PowerSecure’s chief spokesman, told Tribune Business that its acquisition by Southern Company would have no impact on its recently-signed contract to manage BEC’s newly-created operating subsidiary, Bahamas Power & Light (BPL).

He also confirmed that PowerSecure had not informed the Government about its imminent sale prior to signing the February 9 contract to manage BPL, citing the need to maintain confidentiality given that the firm is listed on the New York Stock Exchange (NYSE).

“Since PowerSecure is a publicly traded company, the potential acquisition discussions were required to be completely confidential,” Mr Bluth told Tribune Business via e-mail.

“No one was aware of the potential acquisition until the agreement was announced on Wednesday afternoon.”

Tribune Business understands that the Government and BPL Board, headed by chairman Nathaniel Beneby, were immediately informed of the deal by PowerSecure as soon as the official news release was issued to the market.

Pledging that nothing would change in regards to PowerSecure’s approach to BPL, and the management contract, Mr Bluth added: “PowerSecure continues to operate as an independent company, and will be a wholly-owned subsidiary of the Southern Company upon completion of the merger.

“The same management team, with the same dedication and commitment to the Bahamas and BPL, remains in place.”

Despite Mr Bluth’s reassurances, debate was still raging last week as to whether PowerSecure should have disclosed the imminent Southern Company deal to the Christie administration prior to signing the February 9 management contract.

While PowerSecure’s need, especially as a publicly-traded company, to maintain commercial confidentiality was valid, one financial analyst said it should have held-off from signing the BPL contract until after the Southern announcement.

“That’s a very material event,” the analyst, speaking on condition of anonymity, said of the deal. “PowerSecure should have postponed signing at this time. That’s what I think.

“Southern would have known about the PowerSecure transaction with BEC. They’d have had to disclose that in due diligence.”

K P Turnquest, the Opposition’s deputy leader, questioned whether PowerSecure’s failure to disclose - and the February 9 signing - “constitutes a material breach” of the contract with the Government to manage BPL.

He asked whether PowerSecure had “the ability to sign that contract”, knowing its purchase was near, and whether there were terms in the management agreement that dealt with such situations.

“In my mind it amounts to a material breach, because the Government of the Bahamas would have made an arrangement with a group, PowerSecure, and I would suspect there’s language in that contract with respect to ability to sign,” Mr Turnquest told Tribune Business.

“If PowerSecure was involved in negotiations, and didn’t disclose that fact, you’d have to imagine it’s a breach. There must have been some language in that contract that speaks to the ability to assign, and if that language is there, the validity of the contract may be in question.”

Mr Turnquest also questioned what would happen if Southern was unhappy with the BPL management terms, and wanted to change them, or if BPL and the Government sought to do similar.

Tribune Business understands from persons familiar with the BPL contract that there is no clause that specifically speaks to, or deals with, any change in ownership of PowerSecure.

This newspaper understands, though, that there is a clause in the management agreement that prevents either party - PowerSecure or the Government - from assigning its rights under the deal to another entity without first gaining the other side’s written permission.

With PowerSecure set to remain in existence as a wholly-owned subsidiary of Southern Company, it appears that the former will remain the party directly involved with managing BPL for the next five years.

As a result, it is possible that PowerSecure was not contractually obliged to obtain written government permission in advance, given that it will retain the rights bestowed by the management agreement.

While Mr Turnquest’s concerns about a ‘contract breach’ and potential deal breaker appear to be unfounded, he expressed hope that PowerSecure’s purchase by a larger US-based utility would benefit both BPL and the Bahamas.

Southern is much larger than PowerSecure, generating over $17 billion in annual revenues and around $1.7 billion in annual net income.

As a result, BPL - via PowerSecure - may now have access to greater economies of scale, management expertise and resources, and purchasing power when it comes to fuel, generation engines and other equipment.

“At the end of the day, Southern is certainly a company with the resources and expertise that supersedes that of PowerSecure,” Mr Turnquest told Tribune Business.

“On the face of it, the deal should not be an issue. The only question that comes to mind is whether Southern sees this management agreement as an important asset, and are committed to carrying out the same level of diligence and service on behalf of the Bahamian people.

“We don’t want to have a ‘B team’; we need an ‘A team’,” he continued. “The issues that are facing BEC and BPL are significant, and they will certainly require the attention and creative management strategy of a team that has the wherewithal to tackle not only these problems, but the political pressures that come along with it being a government-owned entity, and a Board of Directors and Bahamian public that can be very demanding.”

Mr Turnquest called on PowerSecure and Southern to make “a joint statement” on their intentions towards BPL, adding: “It’s a very material issue, and I think it speaks to the level of transparency that we ought to expect.”

However, both PowerSecure and the ‘Southern acquisition’ have received strong support from one of the BEC union leaders.

Paul Maynard, the Bahamas Electrical Workers Union’s (BEWU) president, told Tribune Business that Southern’s purchase “is in our best interests and augurs well for us”.

“This takeover, this merger; what’s happened is going to be in our best interest,” he said. “Southern Company is a big company, and because PowerSecure has been performing so well - they made $214 million and went up to $400 million - that put a target on their back.”

Alluding to the greater purchasing power that would be available via Southern Company, Mr Maynard suggested that BPL would now be able to source temporary generation capacity at much cheaper prices.

While acknowledging that a new power plan was needed eventually to replace Clifton Pier, he added: “You’ve got to see the bigger picture. I’m a pragmatist. No American company has really gone into the Caribbean to manage anything.

“It will be a start here, but everyone’s eyes are on the Cuba situation.”

Tribune Business sources have previously said that PowerSecure intends to use the Bahamas, and the BPL contract, as a ‘proving ground’ to showcase its abilities with one eye on entering markets such as Cuba.

And renewable energy opportunities in the Bahamas are also potentially more lucrative to PowerSecure than the BPL management contract itself.

Mr Maynard, meanwhile, said PowerSecure’s Southern tie would also boost training opportunities for his members in “live line work and all sorts of other stuff”, equipping them with skills they can take worldwide.

“I’m real anxious and concerned about this,” the BEWU leader told Tribune Business. “If we can cut the cost of power in half, it’s a whole new economy for this country. I’m putting my all into making sure we do what we’ve got to do.”