By Frederick Smith, QC
The attempted forcible buy-out of Grand Bahama Power Company by a 100 percent foreign-owned entity is nothing less than an aggressive hostile takeover which is clearly not in the best interest of The Bahamas.
The proposed move contravenes Bahamian law on a number of levels and raises serious questions about the strength of our sovereignty and the integrity of our public institutions. All Bahamians who care about their rights and are committed to national self-determination should call on the government to resist this ill-conceived plan. We have until just November 7 to make our voices heard.
Emera has been very secretive about its scheme to compulsorily acquire the roughly 20 percent of GB Power currently owned by Bahamians. The deal is highly convoluted and difficult to wrap one’s head round, but essentially it amounts to a scenario where, depending on the results of a shareholder vote next month, Bahamians will be forced to give up their ownership stake in the company – whether they like it or not.
This deal has been negotiated without any consultation with the citizens and residents who own the shares and without the negotiations even being made public knowledge. The Minnis administration came to office promising public consultation and transparency. If they are to be true to their word, they must acknowledge this hostile takeover is no different from the clandestine, cloak-and-dagger manoeuvers sanctioned and even encouraged by their PLP predecessors – a practice which, incidentally, helped ensure Christie and Co were comprehensively and unceremoniously booted out of office on May 10.
A nation for sale?
If the deal goes through, what sort of precedent will it set in terms of the preservation of our sovereignty and autonomy as a nation? Going forward, can any public utility or BISX-traded company be acquired by a foreign entity that has the buying power to force Bahamians into a corner? Will our government stand by and watch as economic invaders work to undermine Bahamian empowerment and wealth acquisition for their own selfish gain?
Throughout the years since independence, a crucial theme of our public policy has been the promotion and protection of Bahamian ownership in key infrastructure and utilities as a symbol of our nationhood and commitment to self-determination. It would be most unfortunate if on their watch, the Minnis administration were to allow this principle to be betrayed on behalf of self-interested international bullies with deep pockets.
No basis in law
Emera has concocted this clandestine deal by applying to the Bahamas Investment Authority (BIA) for approvals, which it appears have indeed been granted. However, as this is not a body that exists by any law, the approvals have no legal basis. Though this practice of foreign entities applying to the BIA for permission to conduct business in The Bahamas is a longstanding one, it is simply not binding in legal terms and would crumble if challenged in the courts.
Furthermore, in tying the hands of shareholders and essentially forcing them to sell their interest in GB Power, the deal contravenes the basic property rights of citizens and residents as outlined in the Constitution. Prime Minister Minnis and his colleagues must not be seen to facilitate and condone a deal what would violate the fundamental rights of Bahamians.
Under the Hawksbill Creek Agreement, the documents which sets out the administrative structure for Freeport, the Grand Bahama Port Authority (GBPA) is responsible for all utilities within the port area. The Agreement states that: “The Port Authority shall have the sole right to construct and operate utilities” including electrical supply. This does not mean the Port cannot assign another entity to run the day-to-day operations of GB Power, but nowhere in the Agreement is permission given for the GBPA to downright abdicate its responsibilities to the detriment of licensees and the residents of Freeport.
The GBPA must step up and fulfill the role for which it was created – managing the economic and administrative affairs of Freeport for the benefit of those who live and work there. Instead, the Port seems poised to stand aside and allow an external entity to monopolize a key infrastructural asset of the city.
Breaking a fine balance
The entire point of the original arrangement with Emera, was to ensure the GBPA remained in control of GB Power. The board of directors was to be equally appointed by GBPA and ICD Utilities (ICDU) the parent company of GB Power, and because of the Hawksbill Agreement, the GBPA would retain management control. Most importantly Bahamians, especially residents of Freeport, would be able to benefit from the profits generated from the local power company.
This is how matters stood for nearly two decades. Now, Emera is seeking to turn all of this on its head and create a construct in which Bahamians and residents no longer have any direct or indirect ownership and GB Power. Going forward, the company will no longer be in the control of the GBPA and can ignore its obligations under the Hawksbill Creek Agreement.
A shameless rip off
More than anything else, the move represents a shameless rip off and disempowerment of Bahamian citizens. Currently, local shareholders in ICDU own a slice of the company which gave them a 10 percent return on their investment each year for many years. If the transaction is allowed to go through, after November 8 Bahamians will own nothing.
Former shareholders will be given only depository receipts (DRs), will be deprived of receiving profits from our local power company and may or may not actually get dividends in the future. In fact, quite ominously, the company has made a point of cautioning about the possibility of any future profits from DRs. Henceforth, the fortunes of the company will be governed by the Toronto Stock Exchange and any litigation to assert the rights of Bahamians will have to occur in Canada.
GB Power is the most profitable subsidiary of all of Emera’s plethora of Canadian and international companies. But any dividends that are paid out to Bahamians will come from Emera International, which averages out all profits and losses from its corporate galaxy. And, a 25 percent tax will be deducted on any dividends issued on DRs in Canada, so Bahamians will get even less, while the tax money siphoned off from us will not go to benefit The Bahamas, but rather Canada.
This move comes at a time when shareholders of ICDU are already frustrated because dividends stopped being paid out a number of years ago. Freeport is hurting and shareholders will be motivated to vote in favour of the move because they need money and haven’t been getting their due for some time; especially just before Xmas!
The lack of dividend payments has led – almost certainly intentionally – to a depression of the value of ICDU on BISX. Meanwhile, other power companies both within and outside of Emera’s galaxy have seen increases in value. This in turn, has led to auditors valuing the shares as low, but once Emera owns 100 percent, electricity rates in GB will no doubt increase and residents and businesses of Freeport and Grand Bahama will pay for any power plant upgrades or other infrastructural improvements, without reaping any of the financial benefits.
So, Bahamians, especially residents of Freeport, who invested in their future nearly 20 years ago and actually own part of GB Power and are entitled to accountability from the company, will end up with nothing but an unenforceable promise of less valuable and highly taxed dividends from a foreign entity unrelated to GB Power. There will be no transparency of the financial value of GB Power as it will no longer be listed on the Bahamian stock exchange, so the shareholders will never know if they get what is owed to them. The company will file no financial statements here, and there will be no accountability to our local Securities Commission or any kind of financial scrutiny by The Bahamas government to look after the interests of Bahamian shareholders.
A fair deal for Bahamians
If Emera would like to acquire the all of ICDU, they could simply trade shareholders one share of GB Power for one share of ICDU. This would be the simplest and most honest process. This is how Emera operates in the Eastern Caribbean, where the citizens of each country where the company operates own direct shares in the local operator, which are traded on the Caribbean Stock Exchange.
Why are they not seeking to repeat the same formula in The Bahamas? For two reasons: 1. Because it is more profitable to Emera, which already makes massive profits out of GB Power, to pay local shareholders a lower dividend based on the average performance of its many companies (or possibly no dividend at all); and 2. Because the Canadians know they are operating in a country with a long history of clandestine deals that unfairly privilege foreign interests.
Nevertheless, we as Bahamians must stand up for our fellow citizens. We must defend our rights and our economic independence from this type of dangerous encroachment. Anything less than a share-for-share swap that leaves local investors with an active stake in GB Power is totally unacceptable and we simply must demand our government firmly rejects the deal currently on the table.
For my part, I strongly urge the Minnis administration to stand up for sovereignty, self-determination, empowerment of Bahamians and a direct piece of our economic pie! I urge them to use this opportunity to bring an end to the culture of secret deals and the privileged position of wealthy foreign entities in our economy. Through this attempted hostile takeover, Emera has presented the government with a wonderful opportunity to live up to its election promises of promoting transparency, encouraging fairness and ushering in “The People’s Time”. They must confront Emera and stop this deal in its tracks before it is too late. November 7 is right around the corner. So is May 9, 2022!