By NATARIO McKENZIE
Tribune Business Reporter
The private sector yesterday questioned “what’s next” for Bahamas Power and Light (BPL) after it severed its relationship with its management partner, PowerSecure.
Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, queried the Government’s and Board’s strategy for BPL going forward, given that the energy monopoly’s problems remained largely the same as those that existed prior to PowerSecure’s March 2016 appointment.
“We still don’t know the terms of the management agreement, nor have we seen the business plan [tabled in the House of Assembly yesterday], something that we have requested from the beginning,” Mr Sumner said.
“The fact that they made the decision to sever ties, I guess, speaks to the relationship between BPL and PowerSecure. One of our concerns would be over the future of the company? Are they going to revert to the old management, or will there be new executives?
“Are they going to go through a streamlining process to make the company leaner, and are they going to engage the private sector on renewable energy and promoting solar and LNG facilities?”
Mr Sumner added: “The announcement certainly came as an interesting twist. This is something we certainly are going to be watching. Earlier this week we met with BPL’s Board to discuss ongoing partnerships with BPL and the Chamber, and we are committed to working with management to bring about lower energy costs and improve energy efficiency If this separation will lead to those end gains, then they will have the support of the business sector at large.”
Gowon Bowe, the Bahamas Institute of Chartered Accountants’s (BICA) president, told Tribune Business: “One of the important elements when you outsource management functions is there has to be clarity what decisions and authority an entity has, and that has to be honoured.
“We saw that there was the inability of PowerSecure to be able to raise rates they had proposed in their own business plan. I think that their ability to ingratiate themselves to the local community was hindered, and while they inherited a bad situation, maybe they should have been more forceful in stating their case.
“The concern that would remain is what is the transition for management? Is this going to be a contractual management-type arrangement. Will it be local management, and have they identified those players? We have to take a look at this now and say what did we get out of this arrangement, and what cost - if any - is there to severing the arrangement. If there is a cost that needs to be clearly articulated.”
Desmond Bannister, minister of works, did not indicate to the House of Assembly yesterday whether BPL and the Government would incur any further costs, such as a break-up fee, for severing the management agreement with PowerSecure.
While PowerSecure’s executives will remain in place at BPL until December 31 to facilitate the transition to what the Minister suggested would be an all-Bahamian management team, he gave no further details about the Government’s strategy moving forward.
The Bahamian private sector, in particular, will be especially eager to learn the Government’s plans, given that energy sector reform - with BPL the critical component - is key to boosting GDP growth and economic competitiveness.
Unless BPL’s annual $20 million-plus losses are reversed, and the cost and reliability of energy transformed, the Bahamas’ ability to grow and create jobs for an expanded population will continue to be impaired. With BPL still plagued by outages, much remains to be fixed in the Bahamas’ national energy infrastructure.
The ‘business plan’ left behind by PowerSecure identifies many of BPL’s numerous financial, technical and operational challenges, and provides something of a ‘road map’ on how to solve them. It remains to be seen whether anyone will take this up.
Prior to addressing Parliament, Mr Bannister yesterday confirmed Tribune Business’s exclusive revelation that PowerSecure and BPL had agreed to “amicably” sever their business relationship as of Monday, September 18.
PowerSecure, through its Bahamian attorney, Brian Simms QC, had rejected the Board’s allegations regarding breaches of the Management Services Agreement (MSA) by itself, Mr Bannister said.
The US utility operator had instead “itemised certain alleged breaches by the Board of BPL, both current and former”, with Mr Bannister saying it had “accepted the repudiation of the MSA”.
Mr Bannister told the Chamber breakfast that BPL had paid a total $9.199 million to PowerSecure, and said: “We shall have much time to reflect on the value of this investment.
“Whilst PowerSecure undoubtedly meant well, there is much to be said for cultural knowledge. Placing an otherwise successful entity in the midst of an alien culture generally operates to the detriment of both. There is also much to be said for familiarity with business norms, and for for immunisation from local political influence.”
Paul Maynard, the Bahamas Electrical Workers Union’s (BEWU) president, told Tribune Business yesterday: “As far as I’m concerned I thought PowerSecure came here and put systems in place. I can’t say anything bad about them.
“Other people will have their opinion. Pam Hill had a lot of respect for the union. Whatever problems we had, she did her best to solve them the right way. It is what it is. They will do what they have to do. It is what it is. The Government is going to do what they feel is necessary. They have the mandate to run the country.”
PowerSecure signed a five-year management agreement for BPL in March 2016. It has been in place for a year-and-a-half, with the contract offering PowerSecure a base fee of $2 million per year ($10 million in total), and a potential maximum of $25 million ($5 million per year including a $3 million performance peak).