The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Opposition’s leader yesterday slammed the Government’s plan to refinance $331m in Grand Bahama Power Company-linked debt as “a bombshell” amid concerns it is placing more liabilities “on the backs of the Bahamian people”.

Michael Pintard, the Marco City MP, challenged why the Davis administration is seeking to refinance the $200m it borrowed to acquire GB Power so swiftly given that the deal with Emera was completed just five months ago. And he questioned why the refinancing of two existing loans on GB Power’s books, totalling $131.82m, was only being publicly disclosed now given that the Government would have been aware of this through its due diligence process.

The total $331.82m borrowing resolution, tabled in the House of Assembly on Wednesday evening, seeks Parliament’s approval for a transaction that would permit it refinancing GB Power’s existing loans - one worth $109.892m, the other $22m - plus the $200m that the Government borrowed from a consortium of banks, led by Standard Chartered and Scotiabank (Bahamas), to finance the electrical utility’s purchase from Emera.

Refinancings are typically done if the borrower, in this case the Government and Bahamian people, can secure better terms and conditions - in particular, a lower interest rate and reduced debt servicing costs. Here, repayment of the $200m loaned by the Standard Chartered-led consortium was guaranteed, or underwritten by the Government, on behalf of its Grand Bahama Energy Company acquisition vehicle.

What the proposed refinancing will do, though, is convert the $200m acquisition loan, plus the $131.82m existing GB Power liabilities, into direct debt owed by Bahamian taxpayers rather than contingent liabilities that are guaranteed. This, in effect, also transfers the debt burden from GB Power and Grand Bahama Energy Company to the Bahamian people while leaving the two corporate entities with cleaned-up balance sheets that have less liabilities.

The borrowing resolution, seen by Tribune Business, asserts that the refinancing will “strengthen the position of GB Power Company, facilitate the operation and orderly development of the electricity infrastructure on Grand Bahama, and will allow for the more efficient management of these obligations within the Government’s debt portfolio”.

The refinancing of these commercial bank loans, the resolution adds, will be part of the Government’s “broader debt refinancing exercise for fiscal 2026-2027” by which it seeks “to reduce annual debt service, provide certainty of interest coverage and lessen refinancing risk”.

Mr Pintard, though, accused the Government of “dropping a bombshell in Parliament” through a resolution that places Bahamian taxpayers “on the hook” for what is a net $131.82m debt increase as a result of loan liabilities being transferred to them from a formerly privately-owned utility. The remaining $200m is becoming a direct debt rather than a contingent liability.

“This is a government that just completed the Grand Bahama Power Company acquisition a few months ago. This is a government that just went through a Budget exercise. This is a government that, this July, published its annual borrowing plan for the current fiscal year,” Mr Pintard argued.

“At no time during the acquisition discussions, the Budget debate or in its annual borrowing plan did this government mention that it intended to add $331m to our sovereign debt. Even when directly questioned by the Opposition, the Government failed to tell us that the Bahamian taxpayer would be responsible for an additional $131m-plus in old debts from Grand Bahama Power.”

Dr Duane Sands, the Opposition’s chairman, meanwhile, told Tribune Business that the Government is seemingly “paying no heed” to warnings from Standard & Poor’s (S&P), which in last week’s assessment of The Bahamas singled out GB Power over the threat posed by loss-making state-owned enterprises (SOEs) and growing guarantee liabilities.

And he suggested that the increased borrowing could eliminate any “headroom” the Government may have to offer VAT breaks and other tax-related relief to Bahamian families and businesses struggling with the ongoing cost of living crunch.

“The chickens have come home to roost,” Dr Sands argued. “Obviously, they [the Government] have taken no heed of the admonition or warning of the rating agencies. It’s damn the torpedos, full speed ahead. To put this around the necks of the Bahamian people is a betrayal, and you have to go back to the original transaction.

“Why was it necessary to purchase GB Power, particularly since we were buying it from a private entity. They did not give a cogent or reasonable explanation why this takeover of GB Power had to take place, and now it’s being refinanced to add debt on the backs of the Bahamian people. The only people that will suffer are the Bahamian taxpayers. I think it’s a foregone conclusion we will get downgraded when next year’s review cycle takes place.”

S&P, in last week’s Bahamas country report, voiced concern about the Government’s guarantee of the $280m borrowing that financed its GB Power Company purchase as “further straining its fiscal accounts”. The Davis administration’s own pre-election update revealed the GB Power borrowing would more than double government guarantees for SOEs, raising these from $317.4m at end-December 2025 to $718.1m in this 2026-2027 fiscal year.

“Transforming the typically loss-making SOEs through reforms has been a long-running challenge for the Government. We also think the Government's recent purchase of the Grand Bahama Power Company could strain its fiscal accounts further and limit the reductions it expects for subventions to public entities,” S&P asserted.

“As a result, we think general government debt could increase for reasons other than the Budget balance - namely, off-balance sheet financing and, potentially, the materialisation of contingent liabilities. All that said, with a growing economy, we expect annual increases in The Bahamas' general government net debt averaging 2.5 percent of GDP (gross domestic product) over 2026-2028.”

Dr Sands yesterday argued that the Government has also yet to explain the rationale for the latest $331.82m refinancing package, including why taxpayers are assuming responsibility for GB Power’s existing debts that were left behind by Emera, its former private sector owner. “Where are they going to find the money to pay for it?” he asked.

“We are three months into the new Budget year, and we are taking on additional debt, coming to the House for a resolution for additional debt already…. The fiscal consequences that arise will not fall on them but on the Bahamian people who have to pay.

“Clearly, this additional funding makes it far less likely they will find headroom to give relief from rising fuel prices. I believe they will say they cannot afford to reduce taxes on VAT, gasoline or LPG because of this ‘unexpected’ debt. I am certain this is an example of an anticipated transaction that they simply did not disclose in the Budget debate but knew full well they would have to make.”

Dr Sands implied that, despite knowing it would need to refinance GB Power’s existing debts, the Government delayed announcing this until after the general election to avoid any impact on voters.

And Mr Pintard, his party leader, added: “First, why did the Government originally come to Parliament with a resolution to guarantee the $200m purchase of the Grand Bahama Power Company when they knew they would come back months later and instead turn it into direct debt? 

“Secondly, why didn't the Government disclose that the Grand Bahama Power Company owed more than $130m in debt that Bahamian taxpayers would have to take on?  

“These revelations change the entire complexion of the transaction. The Government held back this information on purpose and instead came to Parliament with a misrepresentation of this Grand Bahama Power Company deal.”