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Minister: Bpl Must Not ‘Burden’ Prompt Payers

Minister of Public Works Desmond Bannister.

Minister of Public Works Desmond Bannister.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday pledged that Bahamas Power & Light (BPL) will clamp down on delinquent bill payers so that compliant customers are not penalised in servicing its $650m refinancing.

Desmond Bannister, minister of works, told Tribune Business the state-owned utility monopoly had to “be more efficient” in collecting sums owed by household and business consumers so that it is “not a burden” on those who pay their bills on time.

This will become increasingly important once the bonds to refinance BPL are placed, given that the fee customers will pay to fund the interest and principal payments due to investors will fluctuate depending on various factors that include how many are not paying their bills and to what extent.

Mr Bannister yesterday conceded this could penalise compliant consumers, while acknowledging that BPL’s history in collecting sums due was not a good one given that its accounts receivables stubbornly remain in the $90m-$100m range.

Arguing that BPL “has to improve every aspects of its operations”, the minister agreed that the utility “can no longer be lax and complacent with the people’s money” if it is to regain public trust and contain any extra cost associated with the near-doubling of its existing $321m debt via the upcoming refinance.

Mr Bannister revealed that BPL’s rate reduction bond issue is set to be placed in the first week of January 2020, with the date having been pushed back from its November 2019 target.

He added that Dr Donovan Moxey, BPL’s chairman, together with Geoffrey Andrews, chairman of the The Bahamas Rate Reduction Bond Ltd, the entity that will issue the bonds, were currently in New York to negotiate their price (interest rate) and other terms and conditions with major financial institutions and investors.

Voicing optimism that the Bahamian team will be able to secure “very favourable rates”, Mr Bannister said he was also “absolutely” confident that BPL customers will ultimately see a reduction in their electricity bills despite the addition of the bond fee because this will be offset by the more efficient, cheaper energy that the utility will deliver.

“We are looking at the fuel mix, we’re looking at the increased efficiency of the engines, and we believe that ultimately it’s going to make a difference,” Mr Bannister told Tribune Business. “We’re also looking at what we anticipate will be lower interest rates on the funding that it’s carrying. I don’t anticipate it will be as much of challenge as BPL has now.

“BPL needs additional capital infrastructure works and, putting all that in place, we anticipate the operation will be more efficient, cheaper to run and fuel costs will be cheaper because of the fuel mix. Ultimately, the consumer will benefit by a large amount.”

BPL will likely be hoping that its new 132 Mega Watts (MW) of generation capacity via Wartsila, and the planned Shell North America multi-fuel plant that is due to be constructed and operational by 2021, will reduce fuel and other costs sufficiently that this more than offsets the additional bond servicing fee added to consumers’ bills, resulting in a net decrease in electricity costs.

However, legislation to facilitate the Rate Reduction Bond (RRB) issue, which was tabled in Parliament earlier this week, makes clear that BPL’s customer base will be relied upon to service what is essentially a doubling of the debt burden associated with the utility to secure its financial future.

BPL’s customers will thus be made to pay for decades of financial mismanagement and political interference at BPL, and the failure to hold successive governments to account for failures that have resulted in the utility amassing regular annual losses averaging around $20m since 2006-2007.

And the legislation, which will replace a similar Act passed previously by the former Christie administration, provides that the bond fee paid by consumers can be adjusted - “at a minimum semi-annually - to ensure that the collection of such fee will produce sufficient revenues to pay all ongoing financing costs as the same become due and payable”.

This means that BPL customers who pay their bills in full, and on time, could find themselves penalised by the actions of delinquent payers. The Bill says fee adjustments “will take into account historical and reasonably foreseeable differences between amounts billed and amounts collected”, listing “customer defaults and delays” as a key factor determining this variable.

Acknowledging such concerns, Mr Bannister said: “One of the real challenges with BPL now has been the lack of efficiency in finding ways to collect on so many consumers.”

Pointing out that Bahamians frequently switched addresses without settling outstanding balances that were not covered by deposits held by BPL, the minister added: “The company is going to have to be challenged to be more efficient than it has been so it will not be a burden on consumers like you and me who pay our bills.

“I would be offended if I thought BPL imposed a levy on me because of their inefficiency, and we’re going to have to make sure that chain and culture doesn’t happen.” Mr Bannister agreed that BPL’s existing $90-$100m accounts receivables were “too much” and “completely unsustainable”, adding that the utility needed to start improving its collection processes and techniques now.

“BPL has to improve everything it does in its operations,” he blasted. “Every single thing. It can no longer be lax and complacent with the people’s money. The Bahamian people are not going to tolerate that any more.”

The rate reduction bond issue will exchange BPL’s legacy BEC debt and other liabilities for new debt, which will be kept off BPL’s balance sheet via the The Bahamas Rate Reduction Bond Ltd’s role as issuing agent, thereby relieving the Government of its existing $230m guarantee.

The old liabilities include around $321m in bond and bank debt; a $100m employee pension fund deficit; and other assorted liabilities including the cost of environmental clean-ups at various sites around The Bahamas. It is likely that some of the financing may also replace the $100m short-term funding that helped acquire the 132 Mega Watts (MW) of new Wartsila engines.

Some observers will likely be sceptical that the $650m bond issue will obtain lower interest costs than what BPL is paying on its current debt, especially since the sums involved have doubled and it will no longer be guaranteed - although the new Bill refers to unspecified “property” that can be used as security.

However, Mr Bannister said: “Our people are currently in New York now and negotiating those rates. We anticipate the rates will be very favourable. I’m hearing optimism from New York, but will wait and see what they come back with.”

Describing the $650m refinancing as “really a debt reduction bond” as opposed to a rate reduction bond, he suggested that there was little alternative to its placing given the urgent need to remedy BPL’s “broke” financial status.

“BPL has a debt burden, which the Government has guaranteed, that stands at around $321m,” Mr Bannister explained. “The company is essentially broke, and has been broke for a long time. It cannot invest in infrastructure. It’s essentially been crippled in doing anything for itself for almost the last two decades.

“This is going to permit the flexibility to operate like any other company. The Government will not be burdened with that guarantee because the debt will be paid off. The whole idea is that the guarantee be removed, the old debt settled, and BPL will have to run as a responsible company. We believe we have a Board to make that happen.”

Comments

Well_mudda_take_sic 8 months ago

The very deceitful Bannister is blowing sunshine up the arses of potential buyers of the rate reduction bonds. It's commonly known BPL's high receivables exist because the vast majority of its customers have had great difficulty paying for electricity at yesterday's lower rates. Yet Bannister would have potential investors in the bonds somehow believe these same BPL customers will be able to pay for electricity at tomorrow's much much higher rates. That's the height of lunacy by any measure, unless of course BPL has found a magical way in which blood can be had from a totally dry stone.

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ohdrap4 8 months ago

They should offer a discounted bond contribution for early payment or introduce alate fee for late payment.

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The_Oracle 8 months ago

But the Government has set a precedent for rewarding late or delinquent payments: The Real property tax discount! That's right folks, defer payment until a massive discount is offered to bring your tax/power bill/ wqter bill/ etc current! Let those poor fools who pay in full each month by the due date foot the bills! Does no one else see how asinine this has become?

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ohdrap4 8 months ago

Yes. I know a fella who owes Water andseeage several thousand dollars. He always says he will omly pay if they give a duscount. Mind you there are no late fees.

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Well_mudda_take_sic 8 months ago

And just think, both BPL and Water & Sewerage will not disconnect their supply services to seriously delinquent customers who are politically-connected. Pariamentarians and Generals within the FNM political organization know its best to ensure the lights stay on for all key FNM supporters even if it means Peter must be robbed to pay Paul.

Minnis is running a Robin Hood government because that all he knows how to do. But that pie of wealth that he constantly seeks to redistribute from is shrinking all too quickly.....and when it's gone, and it's going fast, then what?

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TalRussell 8 months ago

Increasing the Electricity delivery costs will only increase the financial burden upon comrades populaces to remain hooked up to BPL's power grid, yes, no .... The Right to uninterrupted supply Electricity, must be made Constitutional given ....

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totherisingsun 8 months ago

BEC provides poor quality power or no power at all with the highest rates in the world. Residential and commercial customers can go off grid with a battery solar system. The result is continuous, highest quality power at a fixed rate and free of external increases. A state of the art solar system even powers air conditioning 24/7. Continue to invest in a failed institution or invest in yourself. You can turn your generator off and save fuel.

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totherisingsun 8 months ago

Solar is "too expensive" they say. If your bec bill averages $500 per month you hand over $30,000 every 5 years and either spend extra on generator fuel or sit in darkness.. $1000 per month is $60,000.00 over 5 years. You can either pay the utility or pay yourself. You can choose to be a victim or chose to be a producer of your own essential resources or wait for the government to take care of you in a substandard manner and hope for change.

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Well_mudda_take_sic 8 months ago

Our Minnis-led FNM government has likely undertaken to introduce policies (e.g. outrageously high customs duty rates on solar power systems, etc.) that would make it almost impossible for the vast majority of BPL's customers to be able to afford to switch-over to their own much more economical source of solar power, with the possibility of selling to BPL excess solar generated power they don't need for themselves.

The government's new anti-solar policies would likely be necessary to try keep as many customers as possible on the very costly BPL grid, notwithstanding the outrageously high (and likely unaffordable) rates BPL expects to soon start charging its customers. That way BPL could have a better chance of achieving the targeted annual revenues that both BPL and the government have promised would be available to pay the exorbitant interest and principal amounts that will be due to the buyers of the rate reduction bonds. But as they say, blood can't be had from a dry stone!

And to think all of this is going to happen just when many of BPL's residential and commercial customers were hoping they might be able to switch-over to their own solar power systems as an economical means of getting around BPL's absurdly high electricity rates and unreliable supply of power.

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