The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s leader last night admitted “we’re not completely blameless” as he challenged the Government’s effort to “gut” Bahamas Power & Light’s (BPL) mammoth $535m refinancing,.

Michael Pintard told Tribune Business that the former Minnis administration, in which he served as a Cabinet minister, should have proceeded with the state-owed energy monopoly’s Rate Reduction Bond (RRB) as he challenged the Government over how it planned to deal with BPL’s “cash crunch”.

“BPL is cash-strapped to the extent that reports say that several vendors have stopped providing services due to non-payments for works already completed, and they have entered payment arrangements with their largest vendors, and that the money required to conduct both needed maintenance and to proceed with planned capital development is simply not there,” he said.

“Additionally, given BPL’s cash crunch, they were also not able to carry out all of the much-needed winter maintenance activities on their generation assets in preparation for summer 2022. BPL’s dire legacy financial challenges was the motivation for the execution of the rate reduction bond. I regret that our administration did not complete the bond offering while we were in the chair. We should have done so.”

Expanding on these points, Mr Pintard said BPL’s fuel hedging “and cash-strapped nature” were related issues. Executing the former, he added, would have saved Bahamian households significant sums on their electricity bills, and “in the tens of millions of dollars is what they are going to be exposed to” in terms of additional fuel charge costs (see other article on Page 1B).

And, speaking out on BPL’s proposed $535m RRB, after Alfred Sears QC, minister of works and utilities, said the bond was unlikely to proceed under the structure inherited by the Davis administration, Mr Pintard told Tribune Business: “Either the Government or BPL has to provide money for its operations.

“The RRB was a means by which this could be accomplished. This government seems minded not to proceed with the RRB. I concede upfront we really should have proceeded with it, and at the time we were voted out of office we had not done so. We’re not completely blameless on this matter, but we do believe the Government has to move on this.”

Mr Pintard, in a statement, said Citi and CIBC FirstCaribbean international Bank had been involved in structuring BPL’s bond, which would have allowed it to retire $320m-plus in legacy debt and move forward with capital works that would have meant vast improvements in both power generation and transmission and distribution.

“Where will the Government get that money from? In the event that BPL is not allowed to raise rates in a reasonable manner, where will the administration find the money to bail BPL out?” he asked.

“What is the plan? If not the Rate Reduction Bond, then what? With what funds? What structure? The bottom line on this is money.” Despite leading passage of the RRB legislation when deputy prime minister in the last Christie administration, now-prime minister Philip Davis has argued that launching the $535m refinancing will impose too great a burden on Bahamians.

Mr Davis, shortly after his election, said the “20 percent” rise in electricity costs - which will be produced by customers having to service the bond debt via their monthly light bills - “cannot be justified” given that so many businesses and households are struggling to recover from COVID-19’s devastating fall-out.

However, BPL’s Board under the former Minnis administration pushed back against the bid to kill-off the $535m refinancing by defending it as the “optimal solution”. They reiterated that fuel price reductions and electricity generation efficiencies stemming from the bond’s placement will - “within three years” - produce savings that outweigh the costs imposed on BPL customers from this refinancing.

Pointing out that BPL’s $321m legacy debt is not going anywhere, and represents a “significant burden” to the utility’s cash flow worth $2m in monthly interest costs, the statement affirmed that the Government (meaning Bahamian taxpayer) is having to pump cash into the state-owned monopoly to keep afloat because it is unable to borrow funds by itself.

The outgoing Board argued that removing this debt by paying it back through the RRB proceeds, which will remain off BPL’s balance sheet, would leave the utility free to finance transmission and distribution and other key infrastructure developments while persisting with a hedging initiative said to have already reduced customer fuel costs by between 38-44 percent.

Describing the RRB bond’s placement as critical to unlocking cheaper electricity prices and stable, more reliable, energy supply, the departing directors said the $535m raise was also a critical component in their plan for BPL to achieve “an annual operational profit of 5 percent to 7 percent of gross revenues”.

The RRB was to be structured such that the new $535m debt was to be kept off BPL’s balance sheet by having it issued through a special purpose vehicle (SPV), the Bahamas Rate Reduction Bond Company Ltd.

This would have allowed BPL to start afresh with a debt-free balance sheet, enabling it to invest in upgrading its own infrastructure without the need for taxpayer support. BPL customers, via a new charge added to their monthly bills, would be responsible for servicing the interest due on the RRB debt to investors who had purchased the bonds.