By NEIL HARTNELL
Tribune Business Editor
Bahamas Power & Light’s (BPL) boardroom turmoil has already delayed completion of a deal to provide Nassau with cheaper, more reliable energy by a month, it was admitted yesterday.
Desmond Bannister, minister of works, told Tribune Business that Shell North America executives were supposed to sign a memorandum of understanding (MoU) with BPL for New Providence’s new 270 megawatt (MW) power plant from August 3.
Progress, though, has been halted by the infighting that resulted in the utility’s board being dissolved and replaced, with Mr Bannister acknowledging that the new directors needed to get the MoU signed “as soon as possible”.
Yet the Minister, who has ministerial responsibility for BPL, reaffirmed the Government’s commitment to proceed with the Shell agreement as the solution for New Providence’s energy woes, emphasising that it could not be changed by the new Board.
Mr Bannister added that the refinancing of BPL’s legacy debt and liabilities via the proposed Rate Reduction Bond (RRB) issue would also proceed as planned, notwithstanding the present controversy swirling around the state-owned utility.
He revealed that he was “ready to go to Cabinet” with the RRB details for its approval, and suggested that BPL’s new Board would “go on the road in October” to sell the bonds to potential investors in what is likely to be a $500-$650m capital raising.
“Shell was supposed to come here from August 3 to sign the MoU,” Mr Bannister confirmed to Tribune Business. “That was delayed. We need to get the MoU signed as soon as possible.
“Once we get the new Board in place we will have to sign that. We’re going to be basically a month behind, but the commitment of the Government is to Shell. The Board is not authorised to change that; it’s a Cabinet decision.”
The Cabinet ratified Shell as the preferred bidder to build, own and operate a new multi-fuel power plant at Clifton Pier that will be charged with providing more reliable, lower-cost energy to New Providence’s long-suffering households and businesses.
The new generation plant, which is scheduled to become operational in 2021, is intended to boost economic and private sector competitiveness, and enhance household disposable income while reducing the foreign exchange drain from fuel purchases.
Shell was selected by the Board that has now been dissolved, but Mr Bannister’s revelation of the month’s-long delay highlights how initiatives designed to benefit the Bahamian people and national interest can be derailed by turmoil at the top of state-owned enterprises (SOEs) such as BPL.
Paul Maynard, president of the Bahamas Electrical Workers Union (BEWU), which represents BPL’s line staff, yesterday urged the warring parties to “get out of Shell’s way” and let the multinational energy giant proceed with a plant that is “the only way to save BPL”.
“I don’t care what they tell you,” he told Tribune Business. “We need to get out of the reciprocating engine business and go to turbines. We need to go to propane and then on to LNG. That’s the only thing that will save BPL. We need to get off Bunker C and diesel and return to the modern world.
“We [BPL] cannot afford a new plant. We also need to upgrade the transmission and distribution system. That will cost us $100m and we don’t have the money to do that. We picked Shell, and need to get out of Shell’s way and let them do their work.”
Mr Bannister, meanwhile, suggested the RRB issue - the other move critical to BPL’s commercial viability, and which will determine how much of he savings produced by the new Shell plant will ultimately reach Bahamian consumers - would not be delayed or impacted by the Board switch-out.
“I’m ready to go to Cabinet with the directives for the RRB,” he told Tribune Business. “They have to go on the road in October, the Board and the Board for the SPV. We anticipate they will go on the road with respect to that and find the funding they need.
“I’m not letting anything distract me. I’m just sorry we have come to this [the former Board’s infighting]. This thing could have been done in a much different way.”
BPL is currently handicapped by around $350m in bank and bond debt, plus liabilities such as its $100m pension deficit and the need to clean up past environmental pollution. To address this, 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 the legacy debts while keeping the new financing off BPL and the 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 the RRB’s placing has become 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.
“The company needs that RRB,” Mr Maynard agreed yesterday. “It really needs that. I don’t know how they’re going to do that. [New chairman Donovan] Moxey and his crew, they need to get it done as soon as possible.
“As for the Shell deal, they need to look at it quickly and decide what they’re going to do. We need to go with the Shell plant; we need to change.”