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Bpl’S $535m Bond In Singapore Listing

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light’s (BPL) mammoth bond refinancing aims to raise $535m and will be listed in Singapore when placed with international and local investors, a Cabinet minister revealed yesterday.

Desmond Bannister, minister of works, told the House of Assembly during the 2020-2021 budget debate that the Minnis administration’s Cabinet has approved the total sum to be raised by the state-owned utility as part of efforts to place it on a more sustainable financial footing.

“The bond quantum amount of $535m was recently approved by Cabinet, and the use of proceeds rubric has been adjusted to reflect this,” said Mr Bannister, who has ministerial responsibility for BPL. “In addition, Singapore has been approved for listing the bonds and an engagement letter has been executed.”

BPL had initially sought to raise $650m through the placement with investors of its rate reduction bond (RRB), the proceeds from which will be used to retire some $321m in legacy debts as well as provide new working capital to upgrade the utility’s aged transmission and distribution (T&D) infrastructure, tackle its environmental liabilities and tackle other pressing needs that have been repeatedly deferred.

Mr Bannister pledged that the Boards at BPL and Bahamas Rate Reduction Bond Ltd, the latter being the special purpose vehicle (SPV) that will issue the bonds and ensure investors are paid their interest, will “be in a state of readiness once the markets that were impacted by COVID-19 reopen so that the transaction can be brought to a favourable conclusion”.

“The positive momentum for the RRB prior to the COVID-19 pandemic has not dissipated. The change in circumstance means only that BPL must wait for a more favourable market window opens in order to put the bond to market,” the minister added.

Mr Bannister’s upbeat comments to the House of Assembly contrast with his Tribune Business interview earlier this month when he said the Government may have to move BPL aside and secure the nine-figure refinancing the state-owned utility requires itself.

“There’s a question as to whether BPL will go out at all, and if the Government will do the whole thing. We’ll watch the markets and see what’s best. It would simply mean that the Government would get the best deal it can get, and the funding would be available through it to BPL. BPL would be responsible for repaying it,” the minister said then.

“If the market conditions do not improve sufficiently that BPL can go out on its own, that’s something that will have to be decided. We have to look at the economy and what the markets are like, and what type of appetite financiers have.”

The initial obstacle to placing BPL’s RRB was the need to obtain a credit rating for the issue from the major rating agencies - something that was not accomplished prior to COVID-19. And Mr Bannister said in early March 2020 that feedback from the international capital markets had urged the Government to amend the bond’s supporting legislation to provide investors with greater protection given that the issue would have no state guarantee behind it.

BPL’s entire turnaround plan, and the provision of reliable, lower cost energy to its business and residential consumers, depends on placing this bond issue. It has been structured to keep the $535m debt that will be incurred off the state’s balance sheet and eliminated previous loan guarantees made on the utility’s behalf.

Mr Bannister, meanwhile, again pledged to Bahamian businesses and consumers that the additional charge that will be added to their bill to repay the bond investors will not result in their overall monthly energy costs increasing over the medium to long-term.

He added that the new charge will be offset by reduced fuel costs and efficiency gains, produced by BPL’s new Wartsila and General Electric (GE) engines on New Providence, such that the impact on overall bills will be “cost neutral”.

“Our goal is for the NUIC (National Utility Investment Charge) to be rate-neutral within six to ten months of its introduction,” Mr Bannister said. “What this means in simple terms is that compared to 2018 rates, with a number of assumptions, the increase in cost that will result from the addition of the charge will be offset by savings derived from fuel savings and increases in efficiency and management of resources.”

He added, though, that delays in placing the bond issue had forced the Government to step in and refinance $246m worth of bank loans where “the balloon payment” was due on June 11, 2020. “To address this, the Government of The Bahamas agreed to transfer the government-guaranteed loan from BPL’s balance sheet to the balance sheet of the Government,” Mr Bannister explained.

“The creditor agreed to extend the due date from June 11 for 45 days to allow the parties time to complete a new bridge loan. That new bridge loan – which will cover the $246m outstanding – will be a loan between the creditor and the Government of The Bahamas. The Government will then execute a side agreement with BPL requiring BPL to service the new loan, which will remain on the Government’s balance sheet.

“Let me emphasise that BPL will remain responsible for repayment of this loan. The Government of The Bahamas is taking this extraordinary step only to allow the company to have the room to operate, in order to deliver on its promise of consistent, reliable power at a lower cost to consumers.:”

The $246m debt consists of two loans. The first is a $211m loan from a Bahamian commercial banking syndicate, headed by CIBC FirstCaribbean International Bank (Bahamas), while the $35m balance is a separate loan from that same bank.

Comments

DDK 3 months, 1 week ago

Government also needs to get the flock out of the utility business, particularly BEC.

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realitycheck242 3 months, 1 week ago

Why list this Bond issue all the way in Singapore ? Sounds like BPL has a credit rating issue on Wall street !

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sweptaway 3 months, 1 week ago

Singapore !Yeah that's the ticket !BPL call a banker and the secretary tell them the Man out of the office and would you like to leave a message !

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thps 3 months, 1 week ago

On one hand, they criticize for going outside The Bahamas for funding (LPIA), on the other hand they applaud getting funding in The Bahamas (NCP), now they go back to the international market for all of the funding.

I know they won't get all locally but they could have tossed some for local investors.

Wherever the wind blows I guess.

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