The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The extent of the task awaiting the Bahamas Electricity Corporation’s (BEC) new manager has been exposed by its 2014 annual financial statements, which reveal that the utility’s net loss for the prior year has been increased to a mammoth $58.035 million.

Documents exclusively obtained by Tribune Business reveal that BEC’s 2013 ‘red ink’ has been revised upwards by 60.8 per cent or almost $22 million, compared to the $36.075 million originally stated in its audited accounts.

BEC’s financials for the year to end-September 2014 show the increased loss for the prior year relates to the application of new international accounting standards (IAS) to its employee pension plan, which produced a $21.96 million ‘other comprehensive loss’.

According to BEC’s financial statements, IAS 19 had to be applied retroactively to the pension plan, which saw its ‘unfunded liabilities’ balloon by more than $54 million during 2013 to hit $103.088 million.

That liability grew further during 2014, reaching $107.981 million by the financial year-end. That figure represents benefits owed to BEC pension fund beneficiaries which cannot be funded from existing plan assets.

BEC’s existing defined benefit pension plan, which is funded solely by the Corporation paying in a figure equivalent to 13 per cent of every employee’s salary, is but one issue in a wider mess that PowerSecure International is now required to fix.

The last published financial statements for BEC were the original accounts for 2013, contained in the annual report for that year, and which portray a grim financial picture.

That document was tabled in the House of Assembly late last year by Deputy Prime Minister, Philip Davis, but the 2014 accounts - obtained by this newspaper - reveal that BEC’s position subsequently became worse.

Apart from the $26.718 million net loss suffered in the 12 months to end-September 2014, BEC’s auditors warned that the Corporation’s current solvency deficiency increased by almost $17 million during the year.

“There are circumstances known to management with regards to the Corporation’s negative cash flow trend, and impending maturities of all of its obligations and loans subsequent to September 30, 2014, that may give rise to the Corporation’s inability to meet these obligations at the due date,” the Grant Thornton accounting firm warned in the financial statements.

“The Corporation’s current liabilities exceeded its current assets by $171.259 million (2013: $154.578 million). The debt obligations and the limited cash flows from operations have caused management to consider whether they are in a position to repay debt without seeking adequate sources of replacement financing. These circumstances give rise to those issues surrounding going concern assumptions.”

BEC’s current solvency deficiency at that point stemmed from the fact that $231.556 million worth of loan principal was maturing, and becoming due for repayment.

Apart from a $35 million credit facility extended by CIBC FirstCaribbean International Bank (Bahamas), BEC was also confronted with a maturing $211 million syndicated loan put together by four banks - CIBC FirstCaribbean, Scotiabank (Bahamas), Royal Bank of Canada and Bank of the Bahamas.

The syndicated loan, which had already been extended at least three times, was finally refinanced on December 10, 2014, via a six-strong group of lenders.

While CIBC FirstCaribbean International Bank (Bahamas) remained as the lead bank and administrator, the largest portion of the new $211 million facility - some $83.2 million or 39.43 per cent - was taken by Credit Suisse.

Scotiabank and CIBC FirstCaribbean took $65 million and $40 million respectively, with the National Insurance Board (NIB) also coming in for $2.8 million. The syndicated loan is repayable over five years, with repayments supposed to have begun in August 2015.

The $35 million standalone CIBC FirstCaribbean International Bank (Bahamas) loan was also refinanced with the same timescale, and both credit facilities have been guaranteed by the Government.

They represent the $246 million worth of guaranteed debt that the Government hopes to remove from its balance sheet, and the $6.5 billion national debt, when BEC’s legacy liabilities are refinanced by the proposed rate reduction bond (RRB).

Further signs of BEC’s strained financial position come from its accounts payables, which jumped by 35.3 per cent year-over-year to $202.623 million at end-September 2014.

The bulk of this sum, some $122.996 million, was owed to trade creditors at the end of BEC’s 2014 financial year, an increase of more than $35 million or 41 per cent over 2013.

And, in turn, the majority of the trade creditor debt was owed to BEC’s fuel supplier, Shell Western Supply & Trading.

It was awaiting $109.044 million from BEC at end-September 2014, a significant jump over the prior year’s $75.088 million. BEC’s credit limit with Shell Western stands at $120 million.

BEC itself was owed a gross $178.703 million by residential and business customers at its 214 financial year-end. Accounting for a $96.324 million doubtful debts provision, this translates into a net $82.379 million receivable due from the private sector.

Government ministries, agencies and departments, meanwhile, owed BEC a further $40.584 million, some $28.447 million - or 70 per cent - of which were past due.