By NEIL HARTNELL
Tribune Business Editor
Bahamian investors will ultimately be given the opportunity to own the government’s $170m renewable energy financing vehicle through a public share offering, it has been revealed.
An Inter-American Development Bank (IDB) report obtained by Tribune Business reveals that “the final aim” is for “small-scale” investors to buy in via an initial public offering (IPO) of shares in an entity that will be formed to channel funds lent by the bank into utility-size and roof-top solar investments.
The document, revealing that the proposed special purpose vehicle (SPV) is the Ministry of Finance’s brainchild, says it will initially be 100 percent government-owned until it “builds capacity” to own, operate and manage the renewable energy assets it will finance.
“In subsequent operations, the REE (renewable energy entity) can evolve as the renewable energy market matures as well as financing opportunities from other donors and the private sector,” the IDB paper said.
“Eventually, the final aim is for the REE to undergo an Initial Public Offering (IPO) to incorporate Bahamian small-scale shareholders and, as such, create further local participation and local retention in this new energy sub-sector.”
No timeline or details of the IPO’s pricing, terms and conditions are provided, which suggests any share offering to Bahamian and institutional investors is some distance off as the Government seeks to take the lead in driving increased renewable energy penetration throughout The Bahamas.
“To stimulate the renewable energy sector, the Ministry of Finance is taking action in corralling stakeholders towards a sustained effort,” the IDB report said. “On the policy side, to co-ordinate the financing of both [Dorian] reconstruction efforts as well as the renewable energy transformation agenda, the Ministry of Finance has been ensuring that energy stakeholders are aligned on investments in the energy sector.
“In 2019, the Government created a new Ministry of Disaster Preparedness, Management and Reconstruction to break down silos in planning and recovery co-ordination and, in the case of the power sector, to create a greener, more efficient utility infrastructure in the damaged areas. Along with the Prime Minister’s Delivery Unit (PMDU), a key objective of the Government is advancing energy reform by ensuring challenges are addressed in a timely way.”
The IDB report suggested there were too many public sector agencies involved with renewable energy. Besides the Ministry of Works and the Ministry of the Environment and Housing, the Utilities Regulation and Competition Authority (URCA) is the sector’s independent regulator and competition authority.
“A feature of the current institutional set-up is limited integrated energy planning and co-ordination to streamline energy infrastructure investments and prioritise renewable energy and resilience. There are two groupings of renewable regulations relevant for this operation depending on the plant power output,” it added.
These are the Small Scale Residential Generation (SSRG) initiative for systems putting out 100 kilowatts or less, and the Renewable Energy Self-Generation Projects for systems with an output of between 100 kilowatts to one Mega Watt (MW).
“Government-owned entities that develop renewable energy projects, and provide renewable energy support, is an approach that has been used successfully in many countries,” the IDB report said optimistically.
“An IDB renewable energy assessment report notes that of the variety of policy/incentive instruments a country could use to stimulate the renewable energy sector, the most effective include financing incentives, guaranteed access to the grid and a clear government policy promoting renewable.
“To induce renewable expansion, provide credible evidence of financing support, and provide towards fostering a market for renewable energy development, the Government intends to create a specialised entity dedicated to renewable energy.”
That is the entity ultimately targeted for the IPO. However, the plan has already run into opposition from private sector players in the Bahamian renewable energy industry who fear it represents a government takeover designed to squeeze them out and put them out of business.
Others have also argued that the Government’s plans do not appear aligned with URCA’s regulatory initiatives, with the latter’s “buy all, sell all” proposal for compensating renewable users also facing stiff headwinds from the industry.