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Gb Power Suffers $23m Dorian Blow

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Hurricane Dorian’s catastrophic winds and storm surge have inflicted a $23m blow on Grand Bahama Power Company, its Canadian owner revealed yesterday.

Emera, unveiling its 2019 third quarter results, disclosed that Grand Bahama’s electrical utility provider is facing a $12m repair bill to totally restore its transmission and distribution (T&D) system following the category five storm’s passage.

It added that GB Power will also have to cover the $5m insurance policy deductible for its 50 megawatt (MW) Peel Street generation plant, which was inundated with storm surge flooding likely to render it inoperable for several months.

The figures revealed by Emera back previous assertions by Dave McGregor, GB Power’s chief executive, that damage to the utillity’s transmission and distribution network would be “substantially less” than the near-$28m cost incurred to rebuild it following Hurricane Matthew in October 2016.

However, the financials also disclose that GB Power and its parent recorded a $6m earnings hit on the back of reduced sales due to Dorian knocking out electricity supply for several days after it struck in early September.

However, GB Power was said to have restored supplies to all customers whose properties were passed fit to receive energy by end-September 2019. This meant that 16,000 clients, or 84.2 percent of the utility’s customer base, were receiving service within one month of the storm’s passage.

“On September 1, 2019, Hurricane Dorian struck Grand Bahama Island as a Category 5 hurricane, causing significant damage across the island. Emera’s 2019 third quarter earnings decreased by approximately Cdn$16m ($0.07 per common share), compared to the 2018 third quarter, as a result of the impact of the hurricane,” Emera’s corporate filings revealed.

“GB Power’s earnings decreased by $6m for the quarter due to reduced load as storm restoration efforts were underway. In addition, Emera recorded a corporate loss of Cdn$9m in the 2019 third quarter.... for the corporate share of the unrecoverable loss on GB Power’s facilities.”

Despite damage across GB Power’s generation and transmission and distribution infrastructure, Emera said network restoration efforts were “well underway”. It added: “GB Power has restored power to all customers who requested power and are able to receive it and, as of September 30, 2019, power was restored to approximately 16,000 or 85 per cent of its customers.

“GB Power maintains insurance for its generation facilities and, as with most utilities, its transmission and distribution networks are self-insured. It is currently estimated that restoration costs for GB Power’s self-insured assets will be approximately $12m.

“At September 30, 2019, the company incurred and recorded $8m of this estimated cost. The $8m is recorded as a regulatory asset as management anticipates that recovery of these prudently incurred costs through a regulatory process is probable.”

The “regulatory process” refers to how the utility sought to recover its restoration costs post-Matthew from consumers - but in such a way that electricity prices will not increase beyond current levels. Three years ago, GB Power said it would “mine savings” from its fuel and operating costs to recover the rebuilding of its island-wide transmission and distribution network.

As for the Peel Street generation plant, Emera added: “Management is working with GB Power’s insurance companies to assess the damage to its generation assets. It is anticipated that this damage will be covered by insurance, with the exception of $5m, which is GB Power’s share of the insurance deductible, and which has not yet been recorded.

“In addition, Emera recorded a corporate loss of $7m in the 2019 third quarter.... for the corporate share of the unrecoverable loss on GB Power’s facilities.”

Emera added that GB Power’s future earnings could continue to be impacted by the Dorian fall-out, while some of its assets - and the goodwill carried by its Canadian parent - could yet be impaired or written-off.

“At September 30, 2019, GB Power’s total assets were $351m, excluding goodwill, and $76m of Emera’s goodwill was related to GB Power,” Emera said. “The impact of Hurricane Dorian could adversely affect GB Power’s future earnings, and impairment of some of its assets and goodwill could occur.

“The outcome cannot be reasonably determined or estimated at this time. Therefore no impairment was recorded in the 2019 third quarter. The company expects to complete its impairment analysis in the 2019 fourth quarter.”

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