By NEIL HARTNELL
Tribune Business Editor
Bahamas Power & Light’s (BPL) chairman has tempered her “very ambitious” target for completing its long-term financial restructuring, suggesting this may now occur in 2019.
Darnell Osborne told Tribune Business that while she was hoping to arrange and place BPL’s planned Rate Reduction Bond (RRB) issue by 2018 year-end, the six-month delay to closing the utility’s $100m in short-term financing (see other article on Page 1B) makes next year more realistic.
Pointing to all the changes made to the Electricity Act to enable the short-term fund raising, Mrs Osborne suggested a similar exercise may be needed with the Rate Reduction Bond Act to ensure any loopholes and uncertainties were addressed.
She added that while the special purpose vehicle (SPV) that will facilitate the RRB issue has already been formed, the government has yet to appoint its Board of Directors and perform other functions required before the bond - which may seek funding up to $650m - is placed.
The BPL chairman, though, said the RRB process had already begun, and she was working with the utility’s Board finance chairman and chief financial officer, together with the newly-identified investment adviser, to prepare the issue.
“The company [SPV] was formed a while back,” Mrs Osborne told Tribune Business. “We’re waiting for the appointment of directors and some other amendments.
“What we have to also do is have a review and determine whether any amendments are needed to the RRB Act, as happened when we went through the short-term, interim financing. There were quite a number of amendments that needed to be made to the Electricity Act. We’ll take a look at the RRB Act, and have the professionals determine and make sure we’re in the best position to raise the money.”
Asked when BPL hoped to place the RRB, Mrs Osborne replied: “We’re hoping by the end of the year, which is very ambitious. Given the length of time the interim financing took, maybe the first quarter of next year.”
That is in line with the target outlined by the Government to the International Monetary Fund (IMF) during the latter’s recent Article IV visit, with the RRB capital raise critical to restructuring BPL’s balance sheet and providing it with the financial breathing room necessary to upgrade its creaking network.
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 Mrs Osborne has previously said she and the Board will make “the landing as soft as possible” when such a fee is introduced.
“It’s very critical,” she told Tribune Business of the refinancing on Friday. “We’d like to position the company on a better financial footing. We have been able to reorganise the financing as it is now, and have some payments to make, but some of that [RRB] money must be used to pay off current loans on the books.”
Mrs Osborne said that while BPL would be able to launch the first phase of its automated meter initiative through its $100 million in short-term financing, the RRB’s proceeds were essential to “complete the process”.
She was backed by Desmond Bannister, minister of works who has responsibility for BPL, who described the RRB refinancing as “critical”. “You and I need to be able to have some assurance about power in this country, generation and transmission and distribution,” he told Tribune Business. “It’s absolutely critical to do that, and in a way that does not become a burden to the finances of the Government.”
The Government will likely be wary of potential political fall-out from any additional charge that makes light bills more expensive for consumers, especially with global oil prices starting to rise and the potential drag this will cause for the private sector, economy and household disposable income. But the additional charge added to customer bills will likely be a small percentage of the overall amount.
Yet BPL’s dire financial position makes it imperative that a nine-figure restructuring of its balance sheet be implemented to refinance some $350 million in bank and bond debt; a near-$100 million pension plan deficit, and deal with environmental damage and other legacy issues.
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.
Mr Bannister, meanwhile, confirmed to Tribune Business that BPL’s vice-chairman, Patrick Rollins, has been appointed as the utility’s executive director, taking over a post that was last held by Deepak Bhatnagar.
“We thought the new chief executive needed some assistance in certain areas, and guidance from somebody with the kind of expertise Mr Rollins has,” Mr Bannister explained. “Mr Rollins is an engineer by training, and former fraud control manager at BTC.
“He was the most appropriate person, and someone we have tremendous confidence in for critical control areas that are very important to BPL, particularly now.” Mr Rollins remains on the BPL Board as vice-chair.