By NEIL HARTNELL
Tribune Business Editor
Bahamas Power & Light’s (BPL) lenders have warned they will not permit any more debt roll-overs as it readies a $450-$550m restructuring of its long-term finances.
Whitney Heastie, the state-owned utility’s chief executive, yesterday revealed that BPL’s banking syndicate will not permit it to push principal repayment on a $212m loan “down the road” any more.
The warning came as BPL’s Board and management push forward with plans to restructure the utility’s debt-laden balance sheet through a Rate Reduction Bond (RRB). This will exchange old debt for new, with the latter held-off the utility’s balance sheet and investor interest payments financed by BPL’s business and household customers.
Mr Heastie said the total amount BPL will seek has yet to be determined, but estimated it could reach anywhere between $450-$550m depending on which liabilities it sought to address and pay-off.
He estimated that around $100m of RRB proceeds will be used to finance capital investments and infrastructure upgrades, with talks ongoing over whether to cover the employee pension deficit - estimated at around another $100m - through the issue.
“The difficulty we have as an entity is we have this huge debt on our books that we have met, and we have got to pay-off this debt,” Mr Heastie told Tribune Business, putting existing bank and bond debt at a collective $350m.
Around $250m represents bank debt, most of which is owed to a syndicate of local banks. This loan has been extended, or “rolled over”, several times under successive administrations due to BPL’s inability to repay the principal following a decade in which annual losses have averaged between $20-$30m.
“Every administration has simply re-negotiated to push the principal down the road,” Mr Heastie confirmed. “All BPL has been paying is interest. The last one the Board engaged in, the banks, the financial institutions said to us: ‘You’ve done this a couple of times. You can’t do this again. If it happens again we’ll call it’.”
With BPL handicapped by its legacy debt and other liabilities, Mr Heastie said the utility was “working diligently” to move the RRB placement and issuance process forward. Darnell Osborne, BPL’s chairman, suggested that it might now come to market early in 2019.
The former Christie administration’s plan involved issuing the RRB bonds, via a special purpose vehicle (SPV), to Bahamian and international capital markets investors. The proceeds would take out BPL’s legacy debts while keeping the new financing off the utility’s and government’s balance sheets, enabling the former to raise new capital to invest in badly-needed network upgrades.
The Minnis administration initially seemed reluctant to adopt the long-term financial restructuring tool left behind by its Christie predecessor, but BPL’s Board views the RRB’s placing as critical to raising the nine-figure sum required to restructure its legacy debt.
It will add an additional charge to consumers’ electricity bills, representing monies that will be used to pay interest to investors in the RRB, but this will be a small component of the overall bill.
Mr Heastie yesterday said it was unclear whether the RRB will seek to eliminate the $100m employee pension fund deficit, as talks were ongoing with BPL’s two unions over whether to close the existing plan and switch to a defined contribution scheme.
The current defined benefit plan is funded 100 percent by BPL, but should such a move occur it would result in employees contributing to their own retirement. “We’re having discussions whether or not we put the pension in there or keep it out of there,” Mr Heastie added of the RRB, “because the Bahamian people will be paying interest on that money.
“Or do we make up the deficit in the pension over time as we have closed it. We have a chance to catch up.”
Mr Heastie confirmed some RRB proceeds, around $100 million, will be used to finance BPL’s Automated Meter Initiative (AMI), including the roll-out of pre-paid meters, and network upgrades across the Bahamas.
“On these islands we have small things, we call them knick knacks, that will be capital investments,” he told Tribune Business. “We have to fix them to get back to reliability.
“We’re short on generation in Exuma, Bimini and Cat Island. There’s issues up and down these islands. We’re seeing how best to approach these issues under the RRB.”