By NEIL HARTNELL
Tribune Business Editor
Bahamas Power & Light’s (BPL) chairman yesterday admitted some vendors had suffered payment delays because they had “fallen through the cracks” with its new procurement system.
Dr Donovan Moxey pledged to Tribune Business that the state-owned energy monopoly was moving “as quickly as possible” to ensure all outstanding amounts were paid, adding that BPL valued all contractor relationships.
He said BPL’s $95m deal with Wartsila for 132 megawatts (MW) of new generation capacity for New Providence had no impact on BPL’s ability to meet due supplier/vendor payments, refuting suggestions that the financial burden this has imposed on the cash-strapped utility is responsible for the payment delays.
“Part of that issue with them not being paid on time is that we’re working internally to strengthen procurement system processes, and some vendors fell through the cracks,” Dr Moxey confirmed to this newspaper. “That contributed to the delays in their being paid.
“We’re working as quickly as we can to make sure they’re paid. We want to maintain vendor relationships. We’ve been putting in a brand new procurement system at BPL, a new P/O (purchase order) system, and working to get that up and running - and operational - as quickly as possible.”
Dr Moxey was responding to concerns that the financing costs associated with the $95m generation deal were responsible for delayed vendor payments, having further burdening a weakened BPL that is struggling to cope with multiple years of $20m-plus losses.
One source close to BPL, speaking on condition of anonymity, had told this newspaper: “Plenty contractors are on their case. They owe a lot of small contractors who can ill-afford to be owed. They’re [BPL] taking from Peter to pay Paul.
“You have contractors out there annoyed because they’re doing work and not getting paid. The only ones getting paid are the foreign contractors, Wartsila and BWSC (Burmeister)... All the contractors are having problems with the situation. They’re complaining no end to anyone who will listen to them. They need to get that under control.”
Dr Moxey, meanwhile, denied that there was any connection between delayed contractor payments and the financing obligations BPL has taken on as a result of the $95m generation deal.
“We’re fine with that,” he said of the arrangement with Wartsila. “We would not have taken this on if we weren’t, so we’re fine with that.” The BPL chairman, though, declined to provide details on where the $95m financing was coming from.
Asked whether it was coming, wholly or in part, from the $100m short-term financing BPL took out last year; vendor financing from either Shell or Wartsila; BPL’s customers or Bahamian taxpayers, Dr Moxey replied: “I’m not going to get into the details of that.
“We are covered in terms of covering those obligations we have made. We don’t want to get into the details of how we’re doing that at this time.”
Whitney Heastie, BPL’s chief executive, also failed to give specifics when formally unveiling the Wartsila deal yesterday, although he said the necessary financing had been secured by reallocating funds previously earmarked for non-essential capital projects.
“We were able to push aside a lot of capital projects that we decided to forego doing,” Mr Heastie said. He did not identify which works will be impacted, but said a great percentage of the funds allocated had been directed to the Wärtsilä deal.
“We had to reprioritise,” he explained. “Things that are going to negatively impact our customers we said we have to get done; things like maintenance, because we know that will come back to haunt us in summer time.
“There are things that we would like to do, but not necessarily have to do, and we said we would hold off on those investments to ensure that we have the generating assets on the ground to cover what we need for the long-term.”
Many observers, though, were yesterday questioning how BPL has obtained funding for such a deal given its perilous financial position. Saddled with around $350m in bank and bond debt; a $100m unfunded pension liability; and multi-million environmental clean-up costs, not to mention its regular $20m annual losses, the utility has yet to refinance these with the long-promised Rate Reduction Bond (RRB).
BPL contacts, speaking on condition of anonymity, suggested yesterday that the Board and management had gone “all in” on the Wartsila deal in the hope of addressing New Providence’s long-standing generation crisis which only appears to be getting worse.
The state-owned utility has frequently load shed already this year, an unusual development in the winter months when energy demand is at its lowest, and a bad sign for the peak summer periods. The seven Wartsila engines, and their 132 MW capacity, will only be in operation by the “end of summer” 2019, raising questions about what will happen in the next six to seven months prior to that.
“We’re putting in plans to address that,” Dr Moxey promised yesterday. “We’re doing everything we can to avoid load shedding in summer and ensure we have adequate generation supply for our customers. We understand we’re coming into the summer time and are doing everything we can to minimise load shedding activity.”
The 132 MW of new generation capacity, which will be incorporated into Shell North America’s new multi-fuel power plant for New Providence by 2022, is also intended to end New Providence’s eight-year need for temporary generation capacity.
However, Tribune Business sources yesterday suggested BPL is still seeking additional rental generation units to help it get through the next few months, amid concerns that the Wartsila deal will divert much-needed funds from projects such as hurricane preparedness.
“What happens when a hurricane comes?” one contact, speaking on condition of anonymity, asked. “What’s happening now is that BPL is having serious problems getting anything done. It is struggling to pay its bills. It’s having a serious cash flow problem because everything has been diverted to Clifton Pier.
“The consequences are that BPL is not going to be ready for the hurricane, just to get these engines on stream, and its still going to have to load shed this summer. BPL has a serious, and absolutely critical, cash flow problem.”
The Wartsila deal appears remarkably similar to a proposal that helped split the former BPL Board under ex-chairman, Darnell Osborne. Mr Heastie and Patrick Rollins, who is still BPL’s executive director, had proposed using the utility’s $100m short-term financing line to fund 100 MW of new generation capacity at Clifton Pier.
This was intended to bridge the “three-year gap” to Shell North America’s new multi-fuel power plant, and give Bahamians earlier relief from cripplingly high energy bills. But the BPL Board’s finance committee - made up of Mrs Osborne and her ally, Nicola Thompson - shut the plan down on the basis that the utility had insufficient cash flow to finance construction.
The finance committee recommended that the cash flow could not support the construction of the plant by BPL until the Rate Reduction Bond (RRB) funding was in place, which was accepted by all members of the then-Board.