By NEIL HARTNELL
Tribune Business Editor
A PROMINENT QC believes there is “an opening for compromise” over the $35 million Grand Bahama Power Company buy-out that would serve all parties’ interests.
Fred Smith QC, the Callenders & Co attorney and partner, reiterated his call for Emera to give Bahamian minority investors the option of direct ownership in GB Power in exchange for their current shares in BISX-listed ICD Utilities.
He argued that this would make it easier for the Government to approve the transaction, while also “respecting” the objectives of all Bahamian shareholders in ICD Utilities regardless of whether they wish to cash-out or retain an indirect equity interest in GB Power.
Referring to Emera, Mr Smith told Tribune Business: “There is an opening here for them to compromise so the Government can grant approval conditional on those who do not wish to sell getting ordinary shares with direct ownership in a Bahamian utility asset.
“That is the very simplest solution. That way, the financial objectives of those who wish to sell-out are respected; the Government is not standing in the way; and those that don’t wish to sell and maintain an investment in their community’s future can have their shares.”
There is little sign to-date that his rationale is shared by Emera, the Canadian-headquartered utility that owns 80.36 per cent of GB Power. Archibald Collins, the latter’s president and chief executive, previously told Tribune Business that while permitting the 19.67 per cent Bahamian minority to exchange their ICD Utilities shares for GB Power shares was an option, it was never considered when structuring the buy-out.
Emera’s stated goal is to simplify GB Power’s corporate ownership structure by taking out BISX-listed ICD Utilities, the holding vehicle for a 50 per cent in Grand Bahama’s utility monopoly, and de-list it from the exchange. Apart from an all-cash pay-out, Bahamian investors can also elect to retain their indirect GB Power ownership by swapping their ICD Utilities shares for Emera Depository Receipts (BDRs). The latter will be listed on BISX, and these securities will potentially diversify/minimise risk for Bahamian investors since returns will be generated from all Emera’s Canadian, US and Caribbean assets - not just GB Power.
Anthony Ferguson, president of CFAL, the Bahamian investment house that advised Emera/ICD Utilities on the buy-out, previously said the Depository Receipts held the promise of regular dividends for local investors notwithstanding the 25 per cent Canadian withholding tax that will be imposed. He pointed out that, under the current corporate structure, Bahamian shareholders had not received a dividend in seven years.
But, despite 96 per cent of minority Bahamian investors voting in favour of the buy-out, the Government has delayed final approval of the deal until it finishes a review set to be concluded by January 31, 2018.
Carl Bethel QC, the Attorney General, subsequently told this newspaper that the Minnis administration wanted to be sure that approving the Emera purchase is “consistent” with previous policy decisions taken when the Canadian utility first bought into GB Power.
While the delay has proven unpopular with ICD Utilities shareholders whose Christmas spending relied on receiving their payouts, others have revealed they are “totally happy” about the delay and government review.
Pastor Eddie Victor, head of the Coalition of Concerned Citizens (CCC), and a vocal GB Power critic, told Tribune Business that approving the buy-out will “take Bahamian ownership backwards” when it comes to this nation’s utilities and major investments.
“We are confident that the Government is going to take the necessary positions to protect Bahamian ownership in vital utilities like GB Power,” he said. “It would stop what could become a precedent for the country when we need to be working towards getting more Bahamian ownership in utilities and large investments.
“If we go ahead and let Emera purchase all the shares, we’re taking Bahamian ownership in such companies backwards..”
Pastor Victor argued that the GB Power buy-out, if ultimately allowed to proceed as is, would also contradict the Free National Movement’s (FNM) energy sector campaign manifesto, where it promised to privatise Bahamas Power & Light (BPL) but retain majority local ownership.
“This situation has brought the Government to take another look at it,” he added, “because there is a policy that must be established for the country; ensuring that Bahamian ownership remains in GB Power and any power company throughout the Bahamas.
“I believe foreign direct investment in our country is necessary, but I also believe we have to have Bahamian ownership participation. That way, many Bahamian citizens have the opportunity to share in the profits being made, and those profits will stay in the country and not be sent outside.
“It would help to have more Bahamians as owners with interests in these companies. We’re really happy about that [the Government’s review], and it also says to Emera that you can’t come into a country like ours and create a situation where people who may not want to sell are forced to sell.”
Pastor Victor’s comments show that the Emera Depository Receipts (DR) are not equated with indirect ownership in GB Power by many, even though they will be a direct replacement for the ICD Utilities shares. The DR option, Emera and its advisers are arguing, also means that Bahamian investors are not being forced to sell.
And, while Emera and GB Power have repeatedly denied there is any ‘hidden agenda’ behind the buy-out, Pastor Victor again urged Bahamians to retain their shares as they are “worth much more than Emera is telling”.
He added: “If Emera wants those shares they must be valuable, and if shareholders hold them a while longer they can get a higher price. I believe it is more valuable than what they are telling us.”
Mr Smith, meanwhile, expressed concerns that the buy-out - and de-listing of ICD Utilities - would mean that GB Power’s annual financial statements no longer have to be disclosed, resulting in the utility becoming less accountable and transparent to shareholders and customers alike.
“Why should Bahamians receive less transparency with a power company in the Bahamas than Canadians have with a power company in Canada?” he asked. “What’s good for the Bahamian goose is good for the Canadian gander.
“It’s the Bahamian goose laying the golden eggs that the Canadians want, and which Bahamians wish to retain at least a part of.”