By NEIL HARTNELL
Tribune Business Editor
BAHAMAS Power & Light (BPL) has obtained a near-$100 million credit line that will allow it to buy new equipment, and overhaul existing systems, before peak summer demand hits.
Desmond Bannister, minister of works, yesterday confirmed to Tribune Business that BPL had secured much-needed short-term financing from “one of the top finance houses”.
Declining to provide details, given that BPL has yet to make a formal announcement, Mr Bannister said the working capital obtained will be put to much broader uses than simply obtaining extra summer generation capacity.
“BPL has a obtained a credit line, and that relates to a number of factors,” the Minister, who has Cabinet responsibility for the utility monopoly, said. “There are a number of matters that BPL has done. It’s not simply a roll-out of summer generation.
“They’ve [the BPL Board and management] come to an agreement with one of the top finance houses on some figures. As soon as everything is sealed, they’ll release the information. It’s not going to be a secret.” Mr Bannister did not name the ‘finance house’ involved but, when asked by Tribune Business to confirm the $100 million figure, he replied: “You’re in the ball park.”
Securing the short-term financing line is likely to have added to Mr Bannister’s House of Assembly optimism on Wednesday, when he pledged that BPL was on pace to deliver one of its best summer performances ever for reliability.
The Minister also touted $10 million in savings from BPL’s reformed procurement and bidding processes, but no mention was made of how the Government and Board plan to tackle the greatest obstacle to the utility’s overhaul.
That is the $600 million-plus in legacy debts, unfunded pension liabilities and environmental damage that has been carried over from the Bahamas Electricity Corporation (BEC) days, with Mr Bannister yesterday acknowledging that the utility remains “financially crippled”.
He revealed, though, that some bids received for BPL’s short-term generation and fuel supply tenders, which were issued pre-Christmas, included proposals for refinancing its legacy liabilities.
The Rate Reduction Bond (RRB) plan left by the former Christie administration also remains ‘on the table’, with Mr Bannister confirming that all options are open when it comes to placing BPL on a sustainable financial footing.
“BPL had put our RFPs some last year, in which they had solicited bids from persons interested in generation and, as part of that process, any number of persons who would have submitted proposals to take that legacy debt off the table and become responsible for it themselves,” the Minister explained.
“BPL has to analyse these proposals and, in the process, as soon as a determination is made on the one that may be best, I suspect that legacy debt may well be history.”
This would involve a private sector entity refinancing BPL’s legacy debts, with the new capital likely having to be serviced by the utility through monies received from its customers. However, Mr Bannister added that the Minnis administration has not abandoned the RRB plan.
“There are a number of things BPL can do,” he explained. “There is also the RRB, which now that we’ve amended the legislation, is an option to be able to refinance the debt in a more palatable manner.
“BPL will make some determinations on which is the best option in the interests of the country and the Bahamian people; whichever option is the most appealing and less cumbersome to the company. We have to look at what is going to improve the company in the long run.”
The RRB legislation, passed by the former Christie administration, envisaged the creation of a special purpose vehicle (SPV) that would issue bonds to international and Bahamas-based investors.
The capital raised would be used to refinance BPL’s legacy debts and liabilities, with the new debt held off the utility’s balance sheet by the SPV. While this would free-up BPL’s balance sheet for fresh capital expenditure, the RRB debt would need to be serviced by monies received from its customers.
This would involve a portion of BPL customers’ bills being assigned to pay interest on the RRB bonds, and the Minnis administration initially appeared to baulk at this refinancing option given that it likely meant an increase in Bahamians’ energy costs.
Acknowledging that the former government sought to solve BPL’s woes through the RRB, Mr Bannister told Tribune Business: “We met BPL as a company that was crippled. BPL has been totally crippled financially. There was very little they could have done without taking steps to secure their financial future.
“The allegation was that there was too much political manipulation, and they could not do the things they needed to do with their former partner [PowerSecure]. There’s no such political involvement and manipulation with this administration, so BPL has been able to move ahead and do the things they need to do.”
One Tribune Business source, speaking on condition of anonymity, suggested yesterday that BPL may employ a combination of the RRB and private sector vendor financing to resolve its financial mess.
They added that while the RRB may be used to refinance the legacy debt, BPL’s current capital expenditure needs - estimated at over $400 million - could be met by a private group that built a new power plant and conducted other improvements. These monies would then be paid back by BPL via its customers.’
Mr Bannister, meanwhile, said BPL had been able to cut the commission rates paid to agents that collected customer bill payments on its behalf from 3 per cent to 1 per cent.
“They’ve been able to broaden the options for consumers,” he added, “and, in the process, by getting rid of the monopoly they’ve been able to cut the rates, which is good for their cash flow and retained earnings.
“The rate was very high. Without me saying, or appearing to say, anything negative about the companies involved, it was very high.”