The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A CABINET minister yesterday affirmed that the proposed $535m Bahamas Power & Light (BPL) refinancing is not being “pursued at this time” but was less definitive on Shell’s New Providence power plant deal.

Alfred Sears KC, minister for public works and utilities, who is ultimately responsible for BPL, said: “The Rate Reduction Bond, as has been announced, is not a measure that we are pursuing at this time and it would have been announced by minister Halkitis. We are currently engaged in a number of measures to secure more competitive fuel and incorporate renewables. We have a major solar plant, which is being prepared for New Providence.”

Legislation to give legal underpinning to the Rate Reduction Bond was passed under the last Christie administration, with now-prime minister Philip Davis having primary responsibility for it. Had it proceeded, debt securities would have been issued to Bahamian and international investors to raise the necessary capital to refinance BPL’s then-$321m debt; pay for key transmission and distribution overhauls; and deal with legacy pension deficits and environmental liabilities.

The bond principal, and associated interest payments, would have been secured against - and paid by - electricity bill payments by BPL’s customers. However, this would have required a temporary increase in customer bills until improvements in BPL’s electricity costs kicked in to offset this, and the Minnis administration is understood to have declined last June to give the Rate Reduction Bond the go-ahead for fear of its impact on the upcoming election.

The financial markets have now moved against the Rate Reduction Bond, with interest rates soaring as the US Federal Reserve and other central banks move to fight inflation. This means BPL’s bond would attract higher rates, leading to even greater electricity prices for consumers, which was why Prime Minister Philip Davis QC indicated previously it was unlikely to proceed.

Mr Sears, though, was less clear as to the fate of the New Providence power plant deal with Shell North America, which also remained to be closed when the Minnis administration left office in September last year. “I’m not saying anything is off,” he said. “What I am saying is that we are aggressively pursuing measures to incorporate solar, because the public policy of the country is to achieve 30 percent of power generation by renewables by 2030.”

He added that this was “doable”, saying: “We are doing it in Ragged Island. A number of private facilities and investors are putting up solar plants on some of our cays, and we have plans to put solar installations in Acklins, Crooked Island, Mayaguana, Grand Bahama. We have up to over a 60 Mega Watt (MW) facility, which is currently being prepared for New Providence.”

Pressed to clarify statements made by Shevonn Cambridge, BPL’s chief executive, who told this newspaper that the Shell North America deal is in “abeyance,” Mr Sears said he was unaware of what was said and declined to comment.

Mr Cambridge had previously told this newspaper that while “nothing has been taken off the table” when it comes to solving the BPL’s woes, “no active work” or negotiations are taking place on either the Rate Reduction Bond (RRB) or outsourcing New Providence’s baseload generation needs to Shell North America.

Asked about the status of the proposed multi-fuel power plant and liquefied natural gas (LNG) terminal at Clifton Pier, the latter of which was supposed to be financed and developed by Shell North America, the BPL chief said: “There’s no active negotiations.”

As to whether this meant the deal was dead, Mr Cambridge replied: “No, that doesn’t meant that. It only means it’s in abeyance at the moment; that’s the best way of putting it. I’m not aware of any active negotiations.” It was a similar story with regard to the $535m BPL refinancing left behind by the Minnis administration.

“The Rate Reduction Bond, that, too, is kind of in abeyance,” Mr Cambridge told Tribune Business. “There’s no active work being done on the Rate Reduction Bond. All alternatives are being explored, including the Rate Reduction Bond. Nothing has been taken off the table, but nothing has been finalised. We are looking at the best option given the current market.

“Whether you look at the fuel market and what’s going on there, the bond market and what’s going on there, that’s going to affect our decision - whether we go with fuel hedging, whether we go with the Rate Reduction Bond, whether we go with a loan. The experts are looking at it, and are going to come back with whatever recommendations are best.”

Tribune Business understands that negotiations with Shell North America had largely been completed under the former administration but, again, it did not approve the deal before the September 2021 general election. This would have seen the global energy giant acquire some of BPL’s latest Clifton Pier generation assets as part of a 220 Mega Watt (MW) multi-fuel plant that would have supplied Nassau’s baseload generation via a 20-25 year power purchase deal (PPA).

There was talk of the Bahamian government and/ or local investors having a significant minority stake in the power plant, while Shell was also to finance and construct a terminal that would have enabled the use of LNG and thus lower generation costs. This, too, is now on hold with no certainty as to whether it will proceed.