BAHAMAS Power & Light’s (BPL) chairman yesterday pledged to make “the landing as soft as possible” for Bahamian consumers when it adds a debt servicing charge to their bills.
Darnell Osborne told Tribune Business that the utility was working to make this extra fee “manageable and palatable for the Bahamian people” by extracting as much savings as possible from BPL’s existing operations prior to placing a Rate Reduction Bond (RRB),
She added that BPL would “advise the Government in a few months” on the amount of the RRB servicing fee that will be added to all consumers’ monthly bills, its Board having recommended to the Government that the RRB was essential to restructuring the utility’s balance sheet for the long-term. Mrs Osborne said BPL would turn its attention to the the RRB, and long-term needs, once it completed a $100 million short-term capital raise that will fund its summer readiness programme and other customer service improvements.
Revealing that BPL hoped to obtain some of that $100 million before this month ends from a lending syndicate, the utility’s chairman added that recommendations had also been forwarded to the Minnis Cabinet for its approval on the bidding process for its fuel supply and short-term generation contracts. Mrs Osborne said long-term generation was also addressed in the recommendation on the latter.
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.
Mrs Osborne said it was “not so much the exact plan left behind by the previous administration”, indicating that BPL would likely seek a lower amount than the $650 million touted by the former Christie administration to minimise the burden on Bahamian businesses and households.
“The Board has made its recommendation to the Government in terms of needing that RRB done,” she told Tribune Business. “We’ve not given a specific figure... We have to really tie down this interim financing before we can talk about the details of that RRB.”
Mrs Osborne added that “the intention is to go out for an RFP for the RRB”, meaning that BPL will solicit bids from the likes of banks, investment and finance houses, broker/dealers and other capital markets players to act as its adviser/placement agent on the bonds. Recent changes to the Electricity Act and RRB Act will also facilitate the issue.
She also explained that BPL had “held off” on the RRB “to effect some savings in operational costs” that would reduce the sum required, and therefore lessen the burden on consumers.
Mrs Osborne said BPL had already been able to save around $10 million through improved controls and a new procurement system, and said the cash-strapped utility was taking a “one step at a time approach” to fixing its finances.
“In a few months’ time, once we get past the interim financing and turn our attention to that, we will make a recommendation to the Cabinet and go from there,” she told Tribune Business of the RRB.
“We’re almost there. Not far off. In a few months we will be able to advise the Government on how much we need in terms of the percentage on to the bills. We’re hopeful with the savings we’re able to effect that it will be manageable and palatable to the Bahamian people. We’re trying to make the landing as soft for Bahamians as possible.”
The Government will likely be wary of potential political fall-out from any additional charge that makes light bills more expensive, especially with global oil prices starting to rise and the potential drag this will cause for the private sector, economy and household disposable income.
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.
The RRB bonds debt would be serviced by an additional charge added to customer bills, which will likely be a small percentage of the overall amount.
Mrs Osborne, meanwhile, said BPL was “in the final stages of negotiating the short-term financing” vital to enabling the utility to undertake much-needed pre-summer infrastructure enhancements in New Providence, Abaco, Bimini and Exuma.
“I would like to see we’re a month out with the majority of it,” she told Tribune Business of the short-term raise. “We think we can get some more after that. We’re looking at $100 million thereabouts, and are hoping to get some this month, March.
“We can then start summer readiness and look at beginning the Automated Meter Reading (AMR) system. We’re going to try and start with some of that so by the end of the year our customers will see some real improvements in customer service and billing. We want to have some of the money carved out to do that.”
Mrs Osborne said that while some work on BPL’s summer readiness programme had already started, “the bulk of it requires money”.
She added that the Board had made its recommendations to the Minnis Cabinet, and was now awaiting its approval, on the fuel and generation supply tenders.