0

Bpl Fears Gov't Borrowing Strike For $535m Raise

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light (BPL) is "concerned" it will be forced to pay a high price to place its $535m bond issue due to the Government's recent borrowing, a Cabinet minister has revealed.

Desmond Bannister, minister of works who has responsibility for BPL, told Tribune Business the utility's Board were fearful that the 8.95 percent interest attached to The Bahamas' recent $600m sovereign bond will be used as a benchmark to price its own upcoming debt financing which it still aims to place before year-end 2020.

And, with BPL's rate reduction bond (RRB) likely to be perceived as riskier than the Government's borrowing, especially given the absence of a guarantee from the latter and the fact the utility is still in the middle of its turnaround strategy, the interest rate will almost certainly be greater in either the high single digit or even double digit range.

This means that BPL's household and business customers, who will be called upon to service the interest and principal costs owed to investors who buy into the National Utility Investment Bond, may have to pay higher electricity bills than were initially anticipated.

BPL executives previously said the extra charge to be added to customer bills would be equivalent to 15 percent of current consumption, but the higher interest rate that will likely have been set following the Government's recent borrowing may force this to increase.

"I know they are concerned about current interest rates, but they are very optimistic about what they can do and I'm very positive about their leadership," Mr Bannister told this newspaper. "The challenge is if you get a sovereign rate, it's hard to get a rate lower than that on the commercial market."

The Board's concerns were confirmed by BPL chairman, Dr Donovan Moxey, who said it did not want any further delay to the $535m bond raise and will try to obtain an interest rate that is "fair and favourable" for Bahamian consumers.

Implying that BPL will have to balance global capital markets realities with imposing further costs on an economy and society already battered by COVID-19, Dr Moxey said: "We're working to close that bond before the end of this year, so we continue to move in that direction. I don't have a precise timeline for it, but I know our goal is to have that completed before the end of the year."

Echoing Mr Bannister, he acknowledged that potential investors in BPL's RRB issue will base their pricing (interest rate) and risk perceptions on what the Government was forced to pay for its $600m following two 'junk' creditworthiness downgrades and COVID-19.

"Investors will always look at that," Dr Moxey said of the Government's sovereign debt issue, "because investors always look for benchmarks. Given that the most recent pricing for financing was the Government's issue, that's something investors will look at.

"We'll have to try and negotiate a better rate if possible. It was $535m that we've been approved for. That's what we're certainly having discussions with potential investors on, and we will see how much of that can be raised at rates we consider to be fair and favourable.

"We would prefer not to delay, but are guided by reaching the best possible decision for the Bahamian people and how much they have to pay. We'd prefer not to delay, but there are multiple considerations. The focus is getting the best deal possible and closing out the financing. There are a lot of capital expenses we have planned out, and need money to carry them out. These are things we are looking at as well."

Mr Bannister, meanwhile, said the Government was seeking to reform the legislation providing legal underpinning for BPL's bond issue because the present statute is "highly deficient". He added: "Every time we look at going out we find that there are other things that have to be amended. We're getting advice on it, and as soon as we're ready we'll go to market."

Comments

benniesun 1 month ago

Double, double, toil and trouble;

Fire burn, and cauldron bubble.

Fillet of a fenny snake,

In the cauldron boil and bake;

Eye of newt and toe of frog,

Wool of bat and tongue of dog,

Adder's fork and blind-worm's sting,

Lizard's leg and owlet's wing.

And presto.... with magical wishful thinking we have a loan, and all of our bills are paid with extra food on our tables; all of our jobs return to repay the loan and all is right with the world......NOT!

0

observer2 1 month ago

Wow bloggers lets get to work on this one.

I'll leave aside the questionable borrowing at horrible rates from crooked Europeans banks and focus on solar.

While Bahamian's using their dodgy European energy partners are being saddled with hundreds of millions in debt with last centuries global warming diesel power plants - America in Florida is making it very easy and simple for their energy consumers to invest in solar.

This is what Florida Power and Light is doing.

Source FPL Website:

"A hassle-free way to go solar The FPL SolarTogetherTM program gives everyone an opportunity to be a part of the Sunshine State’s clean energy future. With this exciting new program, you can enjoy the benefits of Florida-generated solar energy, while keeping your bill among the lowest in the nation. • Join whether you rent or own • Get up to 100% of your energy from solar • Fixed, low monthly charge • Immediate bill credits
• No upfront cost or insurance • No installation or maintenance • Moving? Take the program with you • Lower your carbon footprint"

50% of our foreign debt is fuel importation with the entire amount flowing through one company owned by you know who.

Probably why we can't go solar or use electric cars....with all this sun raining down on the Bahamas. On the contrary lets now drill for oil and destroy our fishing grounds.

1

concerned799 1 month ago

Couldn't agree more. At this stage more fossil fuel plants is basically suicidal.

Time to go solar, its cheaper even and no risk of oil spills, from oil tankers nor oil wells. Look at that big stranded tanker off Trinidad threatning to sink, do we want that in Bahamian waters?

0

Proguing 1 month ago

So we have an inefficient company, whose customers don’t pay their bills, borrowing at a rate of 9%. What could go wrong?

1

tribanon 1 month ago

Repost:

KP Turnquest is apparently totally out of his depth of expertise and field of knowledge when it comes to the sovereign debt markets and international finance. Most of us were shocked to learn that the recent $600 million bond issue was priced to cost the Bahamas about 9.35% per annum on the actual net proceeds received from this outrageously costly borrowing. The mistake Turnquest has made here is going to end up costing our country well over $100 million in additional debt service (interest) payments when one considers the knock-on effect it will have on the pricing (cost) of future borrowings by the Bahamas in the international markets.

1

tribanon 1 month ago

Repost:

The government, in a statement yesterday, said Mr Turnquest headed a team featuring Mr Johnson and Joy Jibrilu, director-general of tourism, who met with and briefed some 45 potential investors in the run-up to the bond offering. Mrs Jibrilu briefed investors on plans to re-open the tourism sector, alongside the typical fiscal and economic projections.

Can any sane person imagine these three incompetent clowns (Turnquest, Johnson and Jibrilu) negotiating the best available borrowing terms for our nation with international investors and their foreign lawyers? We got taken to the chop shop big time!

At a yield of about 10% per annum, this bond issue will yield for the investing lenders over a ten-year period interest payments totalling more than the US$600 million initial principal amount of the borrowing itself.

And to think this borrowing under outrageous terms is intended to allow government to continue paying the civil work force (including parliamentarians) their full salary and benefits while many in the private sector have had their pay and benefits significantly reduced, assuming they still even have a job. The cruelty here of the corrupt Minnis-led FNM administration is beyond comprehension!

0

BahamaPundit 1 month ago

Agreed. For the first time, I saw the beginning of the end for The Bahamas. This country will more than likely go bankrupt. A 9% interest rate on borrowed funds is unsustainable and almost impossible for a small nation to service, even if taxes go through the roof.

0

tribanon 1 month ago

Just ask yourself:

Why didn't Bannister make his concerns about the implications of the high interest rate on the recent US600 million bond issue known to Minnis and Turnquest, and the public at large, before that bond issue deal was inked?

Why is Bannister only now in a most deceitful way trying to prepare us for the outrageously sky-high interest rate international lenders now seek as a required inducer for them to participate in the BPL US535 million bond issue?

How could Turnquest not have known about the most serious knock-on effect that the ridiculously high 9.35% yield on the recent US$600 million bond issue would have on all future borrowings of the Bahamas from lenders in the international markets?

How on earth are we ever going to be able to afford to pay the scandalously high interest rate payments on these new bond issues that are denominated in a hard foreign currency? We had great trouble servicing the interest costs of our national debt long before these new bond issues came into the picture.

Our most incompetent Minnis-led administration has obviously decided, no doubt on advice from the very sinister IMF that serves the interests of the very greedy foreign lending vultures, that its better to flush our country down the debt toilet rather than reduce the salaries and benefits of the civil work force, including all parliamentarians!

1

Clamshell 1 month ago

The Prime Rate — the rate applied to many credit cards, home equity loans, auto loans, etc. — in the U.S. currently is 3.25%. The Bahamas is borrowing at 9%? Gosh ... it’s encouraging to know that they’re “concerned.” Uh ... “concerned.”

Good grief, right now you could get a better loan rate from a carnival barker or a mafia thug.

0

benniesun 1 month ago

Bankster = mafia loan-shark on steroids.

1

Bahamianbychoice 1 month ago

This Administration will spend over a Billion dollars on a company with a customer base of what..approximately 125,000 persons? They will hand over ownership to Shell NA, same Shell NA that offered to rebuild the plants at no cost. I am hoping the next administration will have a review of all contracts as this certainly sends up red flags of corruption even treason as the country is now is a challenging financial state and there is still power insecurity through out the country. Further, especially given the present Board I do not think is ratified and should not legally be making decisions.....boy what a time in this country! I still curious who will have ownership of the pipelines that the LNG will eventually flow through to the cruise ships. Originally my understanding it was the Bahamian people (through BPL), however, I believe this has changed...what a time.....

0

Bahamianbychoice 1 month ago

I suppose whomever are the domestic entities purchasing the bond locally that Turnquest is speaking about will then own the assets of BPL...all pretty predictable..and certainly not in the best interest of the Bahamian people as a whole.

0

TalRussell 1 month ago

Had the colony's government be seen as good stewards over the economy they would be borrowing at less than 2.9% on high side interest rates.
Shakehead once for Yeah what does God think about you when the pastors across out islands from the pulpits begin to without fear intimidation does openly start to call you out for displaying the ego of King Nebuchadnezzar, you're as had done already been in a *hell of a sh**** load leadership deepwater, Twice for Not?

0

DDK 1 month ago

Nice lines MacB, and point well taken, but the Bard's verse will likely sail over the heads of our great "MAJORITY" despots 🤣😂🤣

0

BONEFISH 1 month ago

The minister of finance said that criticism of the interest rate on the 600 million dollar loan was unfounded. Now this.

You have persons attached to this same government expressing concern about that interest rate. Like someone said to me, this shows the incompetency of the acting financial secretary. He should be the senior technocrat in that ministry but he is a political appointee and crony. Even The Punch which acts as the mouth piece of the Hubert Minnis faction of the FNM has questioned the minister and acting financial secretary competency in this matter. They make a lot of poor fiscal decisions.

0

BahamaPundit 1 month ago

If a Nassau Bank offered you a 9% interest rate on a loan of 300K, you would tell them to CYC. Yet, our Government accepted it on a loan of 600 mill. Crazy Talk!!! Must be a side deal somewhere, some other nefarious intent, or just broke bottom desperate crazy!

0

concerned799 1 month ago

BPL should have been privatized ages ago, now the Bahamian people are on the hook for a huge bond with 10-15% interest rates. Just think how much further we'd all have been if BPL was privatized with a condition it move to solar for all new plant investments?

Why spend so much time digging a further hole with this bond and LNG? Just privatize the whole thing to a new buyer who will be obligated to role out solar.

0

Sign in to comment