The Tribune

• Confirms briefed on critical trades on October 9, 2021

• Says Ministry of Finance advised against execution

• Pintard: ‘No amount of grease’ will get Gov’t off hook

By YOURI KEMP 

and NEIL HARTNELL

Tribune Business Reporters

A Cabinet minister yesterday admitted misleading Parliament by initially denying he was briefed on the Bahamas Power & Light (BPL) fuel hedging controversy that will allegedly cost households and businesses over $100m.

Alfred Sears KC, minister of works and utilities, confirmed that on October 9, 2021, he received a briefing on the rationale for executing transactions, known as “call option” trades, that would enable BPL to acquire additional cheaper fuel at below-market prices and thus keep its fuel charge - and overall electricity bills - relatively low with stable rates.

The minister, who had previously told the House of Assembly on several occasions that he never received any such advice or recommendations, added that he forwarded the e-mail briefing and attachments to the Ministry of Finance and its financial secretary, Simon Wilson, for their assessment.

Describing this as “normal” procedure for any major financial or spending decision facing the Government, Mr Sears said Mr Wilson recommended that the trades - which would have supported the initial BPL fuel hedge implemented in summer 2020 by increasing the utility’s stock of cheaper fuel - not be executed.

The minister added that despite BPL’s then-Board and management trying their “hardest to persuade” the Government to proceed with the oil purchases, the financial secretary’s advice won the day and the trades were never executed. Mr Sears did not explain why the Davis administration took the Ministry of Finance’s position over that of the former BPL Board and management, which had been responsible for implementing the fuel hedge in summer 2020.

Mr Wilson, too, declined to comment when contacted by Tribune Business to explain the justification for not proceeding with the trades (see other article Page 1B). However, under the Westminster system of government employed by The Bahamas, it would be virtually impossible - and highly irregular - for a civil servant such as the financial secretary to make the key decision on a matter involving sums reaching into the tens of millions of dollars.

While Mr Wilson and the Ministry of Finance would have submitted advice and recommendations, the decision on whether or not to proceed with the fuel hedging trades would almost certainly have been taken at the policymaker or ministerial level by either the full Cabinet or a Cabinet committee based on the briefings received.

Thus it should have been the Prime Minister, Mr Sears and their Cabinet colleagues ultimately making the judgment call, which their political opponents claim will cost Bahamian businesses and households a combined $100m over the course of 2023 via soaring electricity bills that need not have been incurred if the fuel hedging trades were executed.

The fuel charge component of BPL bills is set to increase by up to 163 percent compared to the stable 10.5 cents per kilowatt (KwH) enjoyed by the utility’s customers for the just over two-year period to October 2022. Without the cut-priced fuel produced by those trades, BPL had increasingly been purchasing its oil at spot market prices from late 2021 onwards but not passing the full cost on to customers - in contravention of the Electricity Act regulations - for some months.

With BPL’s mounting debts to Shell, its fuel supplier, increasingly unsustainable, the Government has reached an agreement to pay the global oil giant $90m over a nine-month period at $10m per month. It is this payment, and BPL’s huge hiking of the fuel charge to recover this debt and government loans previously made to support the 10.5 KwH price, that has prompted Opposition charges that the Davis administration has cost the Bahamian people over $100m.

Meanwhile, explaining why he misspoke in Parliament, and gave a misleading account of events leading up to the BPL fuel hedging trades’ rejection, Mr Sears said he did not recall receiving the October 9 e-mail when first asked about it by Michael Pintard, the Opposition’s leader.

“I did not recall having received that e-mail. And I stated that I wrote BPL, and I also wrote the PS (permanent secretary), and I asked: ‘Could you refresh me and did I receive it?’ I didn’t get a response, a confirmation,” he added.

“For several weeks, I was in New York, and I took a day and I brought my old iPad. I went back personally and did a search, and I found that I did receive - I think it was on October 9 - I did receive an e-mail with the attachments. It would have gone on to be sent on to the financial secretary, which is normal because they are the technical review in terms of financial clearance. It really was to access a loan which is managed by the Ministry of Finance.”

Mr Sears said that, having realised his mistake, he had a duty to correct the record in the House of Assembly. “The Leader of the Opposition made the allegation again,” he said. “I could not sit there, knowing that the first representation I had made was not correct and, as is my duty, I got up and I stated on the record of the House of Assembly that I had done a search of my e-mail and I had found the e-mail of October 9, 2021, and the response of the financial secretary.

“I stated it on the record because it was incumbent upon me to correct the previous statement that I had made.” A draft Cabinet paper, prepared by the Ministry of Finance and dated September 30, 2021, suggests that Mr Sears had also been briefed before October 9. It said: “The Ministry of Finance has also shared this Cabinet memorandum with the minister of works and utilities to provide his comments at the [Cabinet ] table.”

Philip Davis KC, the Prime Minister, said he had never seen the draft Cabinet paper or its recommendations until recently. “Matters are sent from ministries to the Ministry of Finance relating to financial clarity clearance, and it’s dealt with as a technical issue,” Mr Sears said.

“If financial clearance is rejected, it’s a technical question. It is normally sent to the financial secretary. The package that they sent included a draft Cabinet paper, but that was sent to the Ministry of Finance. The proposition that was advanced was not accepted on a technical basis.”

Mr Sears’ explanation yesterday left Mr Pintard, the Opposition’s leader, distinctly unimpressed. Renewing his call for the minister of works and utilities to resign over the House of Assembly misstatements, he argued that Mr Sears had denied being briefed on the fuel hedging trades “on eight different occasions” as the Government sought to conceal and “cover up” its bad decision before evidence was produced that contradicted their position.

And, voicing astonishment at the implication that Mr Wilson was making the decisions, Mr Pintard said: “It just does not happen. That’s just the reality. The financial secretary is unable make that multi-million dollar judgment call. The Prime Minister has admitted to making the decision.... He and Alfred Sears are trying to get on the same page.”

He pointed out that the fuel hedging trades decision was “a two-step process” where Mr Wilson and the Ministry of Finance supplied advice and recommendations but, ultimately, in The Bahamas’ system of governance, the decision would have been made by the Cabinet-level politicians.

“It has to be said in the strongest terms that the Prime Minister admitted he received the advice from the financial secretary, the minister received the advice, and then they made a decision on the basis of that advice,” Mr Pintard said. “The Government does not have the luxury, and huge is going to allow them to slip out of the fact they denied receiving the very recommendations, advice or briefing that they have now been exposed as receiving.”

Having rejected the arguments of the then-BPL Board and management, he added of the Government: “After it went south and they cost the country over $100m, they then sought to conceal the fact they were given credible information that allowed them to make a sensible decision. They sought to conceal the fact they were properly briefed on this matter.”