The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

GB Power and its majority investor have admitted to "concerns" over the Deputy Prime Minister's suggestion that the Government will further review the already-approved $35 million buy-out.

Archibald Collins, the Bahamian utility's chief executive, in a recent Tribune Business interview effectively conceded that itself and Emera had been taken aback by K P Turnquest's comments.

Mr Turnquest previously told this newspaper that further "policy decisions" would be taken prior to the proposed buy-out of ICD Utilities' minority Bahamian shareholders receiving final approval.

"It's fair to say the Government is taking a look at it," Mr Turnquest said of the proposal, "and we will make some policy decisions with respect to it before any final transaction can be agreed."

This seemed to 'reverse' the approvals said to have already been granted by the Bahamas Investment Authority (BIA) and financial services regulators, raising unwanted uncertainty over whether the buy-out would proceed.

However, Mr Collins said both GB Power and Emera were confident the transaction would withstand any scrutiny and, ultimately, gain the necessary approvals if minority shareholders accept the offer.

"It would be fair to say we were concerned but, at the same time, we're confident that after the Government has had time to assess it on its merits, satisfy for themselves that due process was followed, and weigh that ICD Utilities shareholders with an indirect interest in GB Power can continue to have an indirect interest in GB Power [it will be approved]," Mr Collins told Tribune Business.

"We've had meetings with the Government, and we're optimistic that once they've done their research [they'll find] that nothing untoward has happened here."

Tribune Business sources have suggested there is some disquiet among the Minnis Cabinet over the GB Power deal, given that it runs counter to the Free National Movement's (FNM) long-standing position of creating wealth and ownership opportunities for Bahamians.

The last Ingraham administration made Heineken's 2010 purchase of the Finlayson family's stake in Commonwealth Brewery and Burns House conditional on a total 25 per cent equity interest being offered to Bahamian investors via an initial public offering (IPO).

However, the GB Power deal - which involves a foreign company possibly buying out all Bahamian ownership - is the complete opposite of this FNM strategy.

Bahamian minority investors will decide tonight whether to accept Emera's buy-out, with a vote in favour potentially ending all local equity ownership in GB Power. The Bahamas International Securities Exchange (BISX) last night announced that trading in ICD Utilities shares will be suspended from today until further notice, pending the disclosure of the vote's results.

Such a move is standard practice for a capital markets transaction of this nature, as is the buy-out offer itself. However, the buy-out's opponents last night made a last-ditch bid to sway Bahamian shareholder sentiment, urging them to "stand your ground" and not allow a vital infrastructure asset to become 100 per cent foreign-owned.

Pastor Eddie Victor, head of the Coalition of Concerned Citizens (CCC), said: "We know that there are financial challenges in the Bahamas, especially Grand Bahama, but we appeal to the minority shareholder to stand on principle; the principle of not selling out our country's sovereignty in the energy sector by allowing vital infrastructure like the Grand Bahama Power Company to become 100 per cent owned by a foreign company."

He criticised GB Power's use of the Supreme Court to resist regulation by the Utilities Regulation and Competition Authority (URCA), but Mr Collins told Tribune Business that the "value proposition is not clear to us" if the latter became its primary supervisor.

"In my heart, I believe that customers and residents are well-served by the Port Authority being the regulator of the Power Company," GB Power's chief executive continued. "If the courts decide differently, that URCA is a more appropriate regulator, GB Power and Emera will respect that.

"It's not clear to us where the value proposition will be if we move that to URCA, but if the courts decide that we'll respect that."

GB Power initiated legal action last summer challenging URCA's authority to license and regulate it, arguing that this "conflicts" with Freeport's founding law.

Its amended statement of claim, filed on July 7, 2016, wants the Supreme Court to declare that GB Power can carry on its business without requiring a public electricity supplier licence from URCA.

GB Power's action is founded on the basis that, as a GBPA licensee, it is licensed and regulated by the latter via the Hawksbill Creek Agreement - and not by URCA and the Electricity Act 2015.

It is arguing that the Electricity Act's sections 44-46, which give URCA the legal right to license and oversee energy providers, "are inconsistent, and conflict with, the rights and privileges vested in [GB Power] and the Port Authority" by the Hawksbill Creek Agreement.

Mr Collins, meanwhile, told Tribune Business that it was "hard to imagine the business case would work" if GB Power's East and West End supply electricity supply agreements were not renewed and another company took over.

He argued that "economies of scale" made it extremely difficult for another energy provider to step in, given the relatively small customer base in both areas, which made it difficult to price competitively and achieve a sound investment return.

GB Power's 25-year agreements to supply electricity to Grand Bahama's East and West Ends expire on June 23 and August 31, 2018, respectively, and Mr Collins said: "We haven't had any discussions with the Government.

"It would be hard to imagine that [another company taking over], because of the economies of scale, that the business case would work. Our view is that residents in East End and West End are well-served by being part of a larger group called GB Power.

"We believe that, and we would have every intention to seek an extension of the East and West End agreements. We're confident that stakeholders will recognise that is in the best interest of those communities, but we've not had those discussions yet."

Pastor Victor and the Coalition of Concerned Citizens have urged the Government not to renew the East and West End agreements, arguing that there is a Bahamian group that can replace GB Power at 35 per cent lower costs.