An “essentially insolvent” Bahamas Power & Light (BPL) will ultimately have to be privatised, the Minister of Works confirmed yesterday.
Desmond Bannister, who has ministerial responsibility for BPL, told Tribune Business that the Government would not allow a purchaser to ‘cherry pick’ the utility’s profitable assets, meaning it would have to be acquired ‘whole’.
While declining to provide a timeline for privatisation, and whether it would occur under the current government, Mr Bannister indicated that the Minnis administration would seek to get BPL to a position where it might attract private sector buyers.
Much work needs to be done to reach that point, and Mr Bannister said he expected BPL’s Board to present the Government with a strategy for moving the troubled energy monopoly forward as early as next week.
He confirmed that the PowerSecure ‘model’, where a foreign manager is brought in to operate BPL, had been rejected in favour of an all-Bahamian leadership team that must be in place by year-end.
“The Board is going to present us with a strategy,” Mr Bannister told Tribune Business, when asked how the Government plans to take BPL forward. “I expect that we’ll get that this upcoming week. We’re going to review it, and make some determinations based on their recommendations. We’re going to give it fair consideration.”
Many Bahamians, especially those in the private sector, have called on the Government to urgently outline its strategy for BPL following the termination of PowerSecure’s five-year management contract after just 18 months.
Mr Bannister yesterday reiterated the Minnis administration’s determination to place the utility under local management, saying Bahamians were as capable “as anyone else” of turning its financial and operational performance around.
“We’re looking to have Bahamians run BPL,” he confirmed. “We believe we have people with the experience, expertise and ability who can run a national power company.
“Until such time as it may be privatised, we believe Bahamians can run and operate it as efficiently and effectively as anyone else. That is going to happen, and we are going to meet the goals we have for BPL.”
Mr Bannister’s remarks are the first time anyone in the Minnis Cabinet has mentioned ‘privatisation’ in relation to BPL, and the Minister indicated that this was inevitable once the time was right.
“At some stage BPL is going to have to be privatised,” he told Tribune Business, “but privatisation is not going to involve someone coming in and scooping up the profitable parts of BPL.
“Any purchaser is going to have to understand that BPL has a commitment to the country. Whenever we do get to privatisation discussions, my role will be to ensure that any purchaser does not leave people in Abaco, Andros and all areas and islands that may not be profitable; that they don’t leave them behind.”
New Providence has traditionally subsidised the Family Islands, with profits outweighing losses there, until BPL and its Bahamas Electricity Corporation (BEC) predecessor began their spiral into annual $20 million-plus losses from 2007 onwards.
Mr Bannister’s comments indicate that BPL will have to be privatised as a ‘total package’, with no buyer able to purchase only New Providence and other profitable assets.
However, much remains to be accomplished to get BPL to the point where it can be privatised. Given its current financial predicament, the utility would likely fetch $1 and a buyer agreeing to take on some of its $600 million-plus liabilities.
The Minister conceded as much, telling Tribune Business: “Obviously, as you have written on many times, we have a company that is essentially insolvent.
“We’ve got to determine how best to make it operational, while leaving the responsibility for the debts of the organisation in the appropriate place, so the Bahamian people don’t take on those debts.
“It has to be operational, it has to be functional, it has to be efficient, and we’re going to require BPL to provide the services the Bahamian people need at reasonable cost.”
To prepare BPL for privatisation, the Government, Board and new management team will need to return the utility to profitability. The ‘to do’ list is extensive, as this will involve refinancing the $600 million-plus legacy debt and liabilities; upgrading BPL’s aged infrastructure; reducing electricity costs and boosting efficiency.
The former Christie administration had initially looked at partial privatisation involving BPL’s generation assets when it launched the 2013 Request for Proposal (RFP), and potentially splitting this sector from the transmission and distribution (T&D) business.
It ultimately rejected this in favour of replicating the Lynden Pindling International Airport (LPIA) model, where a private sector manager (Vantage Airport Group and NAD) took over management of the assets, but the Government retained ownership.
This ultimately resulted in PowerSecure’s selection, and the termination of its management agreement leaves the Bahamas no further forward than it was in 2012 when it comes to energy reform. The last five years were effectively wasted, leaving this nation with a significant opportunity cost given how electricity costs are killing economic growth.
The privatisation of state-owned enterprises (SOEs), though, has been extremely difficult to accomplish in the Bahamas, with the Bahamas Telecommunications Company (BTC) sale taking more than 13 years to complete.
Mr Bannister yesterday said the Government would likely “place emphasis on renewable energy going ahead whatever we do”, adding that “wonderful and imaginative ideas are coming to the forefront” on the possibilities in the Bahamas.
He added that the Bahamian people needed to be “educated and committed” on renewable energy, given its potential benefits and central role in energy reform, and the fact this nation was “so far behind” in the sector.
“We expect renewables are going to have quite a role in it,” Mr Bannister told Tribune Business. “One of the issues with solar in New Providence is that it simply takes up large areas of land, so we’re going to have to look at green buildings, roof-top installations.
“We’re going to have to have a national conversation about where we go; whether we amend the Building Code to require solar installation. These are national conversations we have to have, and to get the Bahamian people committed and, first of all, educate them and get them to support an initiative that really has to come because we’re so far behind.”
Mr Bannister added that the training and licensing of renewable energy installers, inspectors and trainers could potentially “open up a whole new industry for the Bahamas”.
Emphasising that BPL was just one of his many priorities, the Minister said: “We have Town Planning issues that we cannot allow to get out of hand, and which have been going on for so long.
“We have issues of prosecutions that ought to have happened and have not happened, there and in other areas, and we have building violations and concerns. All these things are of importance to the scheme of things in this country and the Bahamian people.”