By NEIL HARTNELL
Tribune Business Editor
Bahamas Power & Light’s (BPL) chairman yesterday said it aims to beat the Government’s 2019 first quarter refinancing target, amid delays in accessing $100m in short-term credit.
Darnell Osborne told Tribune Business the state-owned utility was now waiting on Parliament to pass the second Electricity Act (Amendment) Bill 2018 after more legal loopholes were discovered.
The Bill, tabled and in the House of Assembly on Wednesday, permits BPL’s parent, the Bahamas Electricity Corporation (BEC), to borrow and provide security for such liabilities so that its operating subsidiary can fulfill its obligations.
Mrs Osborne revealed that the legislation’s passage will unlock a $100m short-term financing facility put together by a Credit Suisse-led syndicate, with the funds critical to BPL’s “summer readiness” and Automatic Meter Reading (AMR) initiatives.
The facility will provide BPL with the necessary “financial breathing room” until it is able to place the proposed Rate Reduction Bond (RRB), which will refinance long-term debts and liabilities currently estimated at $650m.
While the Government told the International Monetary Fund (IMF) for its recent Article IV report that the RRB will be placed in the 2019 first quarter, Mrs Osborne said BPL’s Board was targeting a more “ambitious” timeline of the 2018 fourth quarter.
She revealed that an investment adviser for the planned RRB could be appointed within the “next two weeks”, the Board having decided to separate this role from that of “placement agent” to ensure there were no “conflicts” and that it received completely independent advice.
“We are actually hoping for the fourth quarter with the RRB,” Mrs Osborne told Tribune Business. “The Government says the first quarter of 2019. They’re being a bit conservative, we’re being a bit ambitious, thinking it can be done by the fourth quarter.
“I’m an ambitious person, I take on these challenges, and we think it can be done in a shorter period of time. We’re thinking more the fourth quarter of this year some time.”
The BPL chair said that “within two weeks” the Board was likely to have selected an investment adviser for the RRB, which will refinance the utility’s estimated $350 million bond and bank debt; cover its estimated $100 million pension deficit; and finance clean-up at Clifton Pier and other environmental liabilities.
“We have a Request for Proposal (RFP) out, and we’re trying to tie down an investment adviser,” she confirmed. “We will be seeing their presentations, and making a decision. From there, once the investment adviser is chosen, we’ll go out for another RFP for the bond’s financial and placement agent.
Explaining why BPL had decided to split the two roles, Mrs Osborne said: “The Board felt it prudent to have an independent investment adviser, although that was not done with some of the other government placements.
“Those who bid [on the investment adviser role] are not interested in the placement as placement agents. We wanted to make sure we got the best advice, independent advice, and no ulterior motives and conflicts.”
Bidders on the investment advisory role number less than 10, and Mrs Osborne said the final value of the RRB has yet to be determined. She pledged that the bond would impose “a minimal amount” on BPL customers, in terms of a “cents per kilowatt hour charge”, that will be used to repay investors who purchase the RRB.
Promising to keep this sum “as low as possible”, she told Tribune Business: “We’re trying to put BPL on a better footing. We have a huge legacy debt we have to deal with, and additional capital expenditure we have to deal with.
“The Minister [Desmond Bannister] mentioned the AMR. We’re getting the short-term financing to get that started, and some of the RRB will be used to refinance both that debt and the legacy debt.”
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 while reducing the latter’s liabilities and the national debt.
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. The actual RRB placement is likely to follow the same strategy, albeit with a few tweaks.
Mrs Osborne, meanwhile, said BPL had “just about” complied with all the conditions necessary to release the $100 million short-term financing provided by Credit Suisse.
“One of the things that we were waiting on to release some of the funds were the latest amendments to the Electricity Act that were tabled on Wednesday, which allow BEC the ability to borrow,” she said.
“In the review of the legislation, we realised some amendments were needed to close this deal. It needs quite a bit of tightening up. We caught some more that had to be done before the money was released. Some of the things in the Act were overlooked.” Parliament is expected to pass the amendments shortly.