The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister yesterday asserted the Government’s energy reforms will generate $87m in annual savings for Bahamas Power & Light (BPL) so it can “dig out from the crushing weight” of $500m in debt.

Philip Davis KC, addressing the House of Assembly on the much-touted industry overhaul, said outsourcing generation and New Providence’s electricity grid to private sector partners will help restore a state-owned utility that was “drowning” in half-a-billion dollars of debt plus $100m in unfunded employee pension liabilities to “fiscal health”.

Although no timeline was given for when these savings will be fully realised, the Prime Minister said almost half this sum - some $43m - would be recovered from ending the temporary rental generation contracts providing around 113 mega watts (MW) of power on New Providence alone. He pledged that these savings “will accumulate until BPL’s entire $500m debt is erased”.

However, Michael Pintard, the Opposition’s leader, told Tribune Business that the Prime Minister’s address to Parliament was more notable for what it did not mention as opposed to what was said. He added that, while yesterday’s proceedings were the Government’s response to his challenge to discuss BPL and the energy sector, it had avoided any real discussion by holding a debate under the guise of ministerial statements.

“I think one of the things with his communication today is that it showed the glaring omissions, the things he did not say,” Mr Pintard argued. “He did not talk about them failing on competitive bidding in a number of key areas in this particular [energy reform] process. And he did not comment on why individual Bahamians were not given an opportunity at price points they can afford to invest in these companies.”

The FNM leader said he was not attacking or criticising the Bahamian-owned companies participating in the energy reforms as independent power producers (IPPs), swiftly clarifying that the Opposition “doesn’t have a problem” with the involvement of any of them.

However, he reiterated concerns over whether the Government has obtained the best energy reform prices, structure and terms possible given that neither New Providence’s baseload generation, awarded to Bahamas Utility Company, a subsidiary of BISX-listed FOCOL Holdings, nor the grid overhaul - handed to Bahamas Grid Company, Island Grid, Pike Electrical and private investors - was subjected to competitive bidding.

“We have a problem with single sourcing it to a particular group of people rather than competitive bidding,” Mr Pintard said. “And they did not make any provision for ordinary Bahamians to buy shares in various aspects of what’s being provided. The one instance where there was an opportunity to buy in, you had to have assets or funds worth $45,000.”

The Opposition leader also argued that any dividends and other profits earned by BPL from its 40 percent equity ownership of Bahamas Grid Company should be directed to the National Investment Fund, or some form of sovereign wealth fund, and “earmarked not just for infrastructure upgrades, retraining the workforce, addressing the pension liability etc.

“We should earmark a portion of those funds to go into a sovereign wealth fund,” Mr Pintard added. The Prime Minister, in breaking down BPL’s projected $87m per annum savings, said $4m of this would come from dividends paid out by Bahamas Grid Company as returns on its 40 percent stake.

Given that Bahamas Grid Company is 60 percent majority-owned by private investors, who invested a combined $30m in equity, the figures released by Mr Davis imply that they will enjoy an average annual dividend return of $6m.

Since Bahamas Grid Company will have a 25-year contract to fix and maintain New Providence’s energy grid, that $6m annual dividend - if achieved and paid out - translates into a $150m payout over the deal’s lifetime. That represents a five-fold return on these investors’ initial investment, which could increase by a further $60m to $210m - a seven-fold return - if the option for a ten-year extension is executed.

Mr Pintard yesterday urged the Government to release how many investors acquired that $30m in equity, and whether they are Bahamian or foreign. So far only one has been revealed - BISX-listed Arawak Port Development Company (APD) - which disclosed it has a $1m stake in Bahamas Grid Company after acquiring 50,000 common or equity shares on July 17, 2024.

However, the Prime Minister yesterday told the House of Assembly that the Government has “included Bahamian participation to the greatest extent possible” with its energy reforms. “The reforms will also help BPL return to fiscal health,” Mr Davis asserted. “In fact, our integrated strategy will generate $87m in annual savings for BPL.

“Forty-three million dollars will be generated from eliminating costly rental generators; $13m will be generated from structured legacy debt payments; $15m will be due to operational streamlining; $12m will be attributed to increased reliability in New Providence and the Family Islands; and $4m will come in from dividends related to the Bahamas Grid Company. 

“These savings will accumulate until BPL’s entire $500m debt is erased.  And all of the measures we’ve discussed will help BPL explore avenues to address their pension obligations,” he added.

“It’s part of a virtuous cycle. As we help BPL dig out from under the crushing weight of debt, we are freeing up resources to continually invest in better service, more modern equipment and further cost reductions that benefit every electricity consumer.”

The Government has yet to release any of the economic models or assumptions underpinning the multiple numbers and projected energy cost savings for consumers that the Prime Minister unveiled yesterday. And key details, such as the price at which the independent power producers will sell energy to BPL, and the latter’s likely prices to consumers, have also yet to be disclosed making it difficult to judge the reforms.

However, Mr Davis continued: “The LNG conversion alone will deliver enormous benefits. By 2026, 177 Mega Watts (MW) of combined cycle LNG generation will replace 107 MW of expensive rental units and provide 63 MW of additional capacity. Between embracing LNG and improving efficiency, BPL and consumers will save approximately $125.6m annually...

“The grid modernisation will also deliver savings as we build the storm-resistant, efficient and intelligent grid of tomorrow. These grid enhancements will save $10m to $30m annually. That money will flow back to consumers in the form of lower rates and better service.

“These revolutionary transformations represent the largest co-ordinated energy investment in our nation’s history, including $820m for New Providence projects and $324m for Family Island projects. This is a $1bn investment in our economy and in our future – an investment that will not just deliver financial returns, but will also improve quality of life, expand economic opportunity and enhance our resilience.”

Continuing with this theme, and pledging that some 1,000 construction jobs will be created by the energy reforms’ roll-out, he added: “By 2030, we will have 65 MW of solar in New Providence and 34 MW of new solar generation across our Family Islands, along with the existing 28 MW in Grand Bahama, Ragged Island and Chub Cay.

“That adds up to 128 MW, which means 32 percent of our energy needs will be met by solar power. This exceeds the global target of 30 percent renewable energy by 2030.” Promising that progress is already happening, Mr Davis said the $130m upgrade to New Providence’s energy grid has begun and will be completed in 12 months, while LNG will fuel the island’s base load generation within 18 months.

“And all of the solar, LNG and mixed fuel systems being set up in collaboration with our Bahamian partners throughout our islands are scheduled to be initiated this year, and will be fully operational by the second half of 2026, delivering lower prices within 18 months and locking in those low prices for years to come,” Mr Davis added.