UPDATE: BPL and PowerSecure have ended their business relationship - full story HERE
By NEIL HARTNELL
Tribune Business Editor
Bahamas Power & Light’s (BPL) Board will hold a ‘crunch meeting’ with PowerSecure today, with the outcome likely critical in deciding whether the latter remains as manager.
Multiple Tribune Business sources yesterday confirmed that the US utility operator is quite willing to “walk away” from its maximum $25 million, five-year BPL management contract if the Board and Minnis administration wish it to go.
The meeting, which will be attended by PowerSecure executives and their attorneys from the US, is viewed as key to determining whether the two sides will ‘kiss and make up’ or separate.
“PowerSecure’s position is that if they don’t want us, we’ll go,” one well-placed source, speaking on condition of anonymity, told this newspaper. “They’re happy to go, but will not come in and say that. If they [the BPL Board] don’t want them, find an amicable way for them to separate.”
Another well-connected contact, also speaking on condition of anonymity, added: “They may be bringing the management contract to an end. It depends on how they [the Board and the Government] want things to progress in getting to that point.” Both sources emphasised that no final decision had been taken.
Darnell Osborne, BPL’s chairman, did not return Tribune Business calls seeking comment on the meeting or the status of the Board’s relationship with PowerSecure.
Desmond Bannister, minister of works, said he was unaware of today’s meeting when contacted by Tribune Business, although it is understood he is not due to be present.
The minister, in a messaged reply to this newspaper, said he would “address a number of critical issues at Parliament” today - likely a reference to the promised tabling of PowerSecure’s management services agreement (MSA) and $900,000 BPL business plan.
However, sources close to the Board suggested its members were expecting PowerSecure to “walk away” as early as today from its management contract.
There is little doubt that the already-fractured relationship between BPL Board and PowerSecure is now coming to ‘a head’, following last month’s near-total breakdown triggered by the firing of former chief executive, Pam Hill.
The Board also demanded that PowerSecure fully reimburse BPL for the $1.9 million lost as a result of the much-publicised fraudulent cheque scheme, and ordered the US operator to “cure all deficiencies and/or breaches” under its contract within a 30-day period that expires in mid-September.
That deadline has now been reached, and Tribune Business understands that the US utility operator is due to respond to the Board’s concerns imminently, rejecting its criticisms and demands.
As previously reported by this newspaper, PowerSecure was especially dumbfounded that the Government and Board were seeking to hold it financially accountable for the vendor fraud scheme when it was the management company that had requested the Ernst & Young forensic audit, having detected that something was amiss.
And it was also questioning the legality of Ms Hill’s termination, believing that its Management Services Agreement (MSA) gives the BPL Board the ability to request a change - but not to fire - the chief executive.
Tribune Business’s sources said today’s meeting will also seek to “bring clarity”, and find common ground, between the two sides over the MSA, especially their different obligations and what PowerSecure is obligated to do as BPL’s management company.
“PowerSecure’s position is: ‘If you want us here, we’ll stay. These are our terms to stay, and this is the plan to get you where you need to go’,” one source said. “‘If you have a contrary viewpoint, we’ll hear you out and see what we can do’.”
They added that the US utility operator was concerned about the increasing ‘reputational risk’ from the BPL contract, with the Board perceived to be leaking information to the media to justify its action and portray PowerSecure negatively.
The minimum $10 million, and maximum $25 million, that PowerSecure can earn pales alongside the $60 billion in revenues that can be earned annually by its parent, Southern Company.
“They’re really trying to figure out why they’re getting so much heartache over such a small contract,” one contact added of PowerSecure.
Tribune Business sources yesterday said PowerSecure had encountered political interference from virtually the moment it signed the MSA agreement with the former Christie administration in March 2016.
Suggesting that the previous government continued to “micro manage” BPL despite the presence of its new operator, one contact said: “They [PowerSecure] should have walked away then, but they tried to stick it out. They tried to be patient, and wait for the politics and the general election to go away.”
The management contract was then inherited by the Minnis administration and new Board, who were deeply suspicious of the commercial arrangements and transactions inherited from the Progressive Liberal Party (PLP).
And there were plenty of signs PowerSecure would be unable to run BPL as a proper business from the get-go. The former Christie administration rejected PowerSecure’s request for an increase in BPL’s base tariff rate, which would have boosted cash flow and ended its practice of selling electricity ‘below cost’ - freeing up funds for much-needed maintenance.
And the previous government’s failure to refinance the Bahamas Electricity Corporation’s (BEC) $650 million-plus in legacy debts and environmental liabilities via the promised Rate Reduction Bond (RRB) has also left PowerSecure and BPL’s hands tied financially.
If PowerSecure does depart, it is unclear how the BPL Board and Minnis administration plan to move the stricken energy monopoly forward, as it will have no replacement leadership or management team in place.