Thursday, Dec 12, 2019

No, thank you

Dr. Donovan Moxey.

The board of Bahamas Power and Light (BPL), and by extension the government of The Bahamas, appears to have collectively lost the ability to approach the dilemma that is the state power company in a reasoned manner.

The recently tabled Electricity Rate Reduction Bond (RRB) Bill, coupled with statements from BPL Chairman Dr. Donovan Moxey and Deputy Prime Minister and Minister of Finance Peter Turnquest are astounding in their scope and offensive in their delivery.

Through the RRB, BPL is asking for parliamentary approval to set up a facility to allow it to access more than $650 million in financing.

Moxey said it is to restructure $320 million in legacy debt and use another $350 million in new spending for “modern power generation”.

However, Moxey has yet to say what modern power generation BPL is seeking beyond that which it has already acquired, and why it would cost $350 million.

And who will pay?

Why, the Bahamian people, of course; via a brand-new fee on all electricity bills.

The people: the perpetual piggy bank of governments that believe our money is theirs to do with as they please.

Turnquest said if BPL does not increase light bills, the government would have to raise taxes to deal with the power company’s debt.

“Unfortunately, the cost of that fix is significant and in order to meet that, BPL, as a stand-alone corporation, has to raise the money,” Turnquest said.

“Otherwise, the taxpayers, the shareholders of the corporation, will have to inject the capital as equity. If we inject the capital as equity, it means that our tax bill will go up because we have to recoup that money.”

Turnquest has also denied that this is a tax.

He is wrong. And he knows it.

He is a very talented accountant.

Anything the government uses legislation to compel you to pay is a tax, no matter what you dress it up as.

His statements were rightly met with outrage.

The Guardian understands the government intended to debate and pass this legislation today.

Certainly, BPL expected to have raised the money by year’s end.

Their situation is so dire that lenders will not agree to buy the bonds unless consumers are commanded by legislation to pay the money back.

Government has postponed the debate, we understand, because of intense media scrutiny and public pushback.

There has been pushback for good reason.

Bahamians are still reeling from last year’s value-added tax (VAT) increase.

Bahamians are still trying to catch themselves from Hurricane Dorian in September, with many supporting family members and dealing with great losses and shuttered businesses.

Many more Bahamians are now on the employment hunt, having lost their jobs.

Acting Financial Secretary Marlon Johnson forecast just this month that unemployment could rise to 13 percent from 9.5 percent.

Many Bahamians are struggling to pay high electricity bills from an unreliable supplier as is.

Who among them does the government think believes it is a good idea to fork over hundreds of millions of dollars more to a government entity that has personified waste and public mismanagement in the modern Bahamas?

How much more does the Minnis administration think the Bahamian economy and the Bahamian people can take?

One prominent person recently lamented to National Review: “What you are seeing is people with very little political experience trying to navigate waters that even the most politically experienced politicians would find difficult.”

That the Cabinet of The Bahamas would rubber-stamp whatever it is that the board of BPL has cooked up without independent analysis and feedback from the public speaks to the competence of these politicians.

Nothing the board of BPL suggests should be taken at face value.

Here’s why.

Shifting targets, meaningless words

BPL has been embroiled in controversy since last summer when its former board was fired and replaced with members of the old board who could apparently work more easily with the government and those apparently cherry-picked by the prime minister.

A new chairman, Dr. Donovan Moxey, a business developer with a background in electrical engineering, information technology and strategic planning, was appointed.

Minister of Public Works Desmond Bannister belittled former BPL Chairman Darnell Osborne, claiming she was fired for wanting the company to pay for her makeup and security cameras.

He asserted that the inaction of the former board members led to blackouts last summer as infighting delayed the repair of an engine at BPL’s plant.

Bannister is being sued for over a million dollars for defamation by the former board members.

The public is picking up the tab for his private attorney.

Prime Minister Dr. Hubert Minnis said last year he ordered a probe of why the former board was fired and an international firm was appointed to conduct the probe.

No one in government or BPL seems able to say what is the status of that supposed probe.

There was controversy at BPL even before the current board arrived.

Last year, an RFP for 80 megawatts in short-term generation was awarded to Shell North America to construct a 220-megawatt liquefied natural gas plant near the site of BPL’s Clifton Pier Power Station.

That raised the ire of other bidders.

The former board also organized a loan to BPL for $100 million for maintenance and other improvements.

Then came the fires.

On September 7, operator error on the part of BPL led to a fire at the Clifton Pier Power Station that sidelined its two largest generators, located at Station C.

They represented 63 megawatts of generation capacity purchased for over $60 million.

To date, not a soul has been held accountable for it.

Suddenly, the Shell deal transformed.

Shell was supposed to pay for the new LNG plant out of pocket and sell power to BPL.

Yet, in March, BPL announced it entered into a deal with Wartsila for a new $95 million 132-megawatt generation plant at Station A at Clifton Pier.

And that this generation, that BPL would now be paying for, was to be considered part of the Shell deal.

No amended Shell memorandum of understanding has yet made it to the House of Assembly.

Moxey said this summer, as blackouts unleashed terror on New Providence, that BPL had to pivot in the wake of the fire and Wartsila was recommend by Shell.

The $100 million in interim financing raised by the former board was used to pay Wartsila, not to maintain engines and carry out upgrades.

Moxey claims the Shell plant is still in the works, but has not said how that deal would work now that Wartsila is in the mix.

BPL continually says one thing, yet does another.

What is the money for?

Early this year, BPL said it hoped to restructure $311 million in debt by the end of the year.

In August of this year, Moxey said BPL was hoping to raise between $450 million and $500 million from the debt restructuring exercise.

Now, Moxey said BPL is looking for $650 million.

Again, he has said $350 million for “modern power generation”.

This, from a chairman who has said BPL is looking to get out of the power generation business.

BPL is investing heavily in a business it claims it wants to get out of.

To recap: BPL just spent about $100 million of recent financing organized by the former board to pay for the new Wartsila plant at Clifton Pier.

As Wartsila is hiring to run Station A, BPL has clearly entered into a management agreement with Wartsila to run that plant that has not been made public.

BPL still claims Shell will provide an LNG plant at Clifton by 2022.

That’s 220 megawatts of generation. The peak demand in summer on New Providence is 250 megawatts.

The Cabinet of The Bahamas has recently announced the approval for the purchase of a $30 million generator for BPL’s Blue Hill plant.

That’s another 25 megawatts which money has already been allocated for, according to BPL and the government.

Turnquest has said the $100 million Inter-American Development Bank contingency loan will be used to rebuild the electrical grid on Abaco, which Moxey said will cost $50 million.

If BPL will soon have sufficient generation assets, and if BPL already has money to rebuild the electricity grid on Abaco, what, then, will the extra $350 million BPL plans to borrow be spent on?

So far, BPL has not said.

At this point, no right-thinking person would trust BPL with $350 million without an ironclad public disclosure and accountability measures about where this money will go and how it will lead to lower bills.

A stunning lack of transparency

The RRB is not necessarily a bad idea.

The former administration proposed something similar, but didn’t get it done.

Ultimately, it would allow for BPL to remove its liabilities to a new facility that would issue bonds to pay back the creditors.

If BPL is no longer servicing its debt, this would allow it to properly maintain equipment and carry out needed repairs and upgrades to its transmission and distribution network.

The government would also be off the hook for BPL’s existing debt.

But rate reduction bonds are not used to repay legacy debt and recapitalize failing corporations.

This is something different.

Whatever it is, of course, the public would ultimately pay.

BPL has not said how much the fee on our bills to repay the RRB will be.

It’s a fee that can shift every six months if those who run the bond aren’t collecting sufficient money to pay it back, so there may be little consistency to what it will be.

But the government plans to make us pay anyway.

A recent event , Moxey ballparked the period of the RRB as being anywhere from 20 to 25 years.

The timeline is unclear.

But the government plans to make us pay anyway.

BPL has not said at what interest rate it expects to borrow this money.

We are talking about a generation of paying an unspecified fee to pay back this money, of which we currently have no clear idea what it is to be used for.

But the government plans to make us pay anyway.

Bahamians are not even being offered the opportunity to participate in the bond, at this point.

Yet, it is being shopped around on the international market and to financial firms locally.

But the government plans to make us pay anyway.

Moxey is very smart, and appears to mean well, but this entire thing is opaque and he should have been sensitized to how this would play out in the public and employed a better communications strategy.

Or any communications strategy at all.

The government, for its part, is insulting us.

BPL has assets in excess of $1 billion.

Surely, there must be some other approach involving a mixture of equity and debt that will not further burden the public.

However, historically poor management, the last two-plus years of chicanery included, has left it as the biggest revenue generating entity dependent on government welfare in the country.

These are tremendous sums of money we are being asked to finance through a direct tax without an inkling of how the management structure will function to make sure BPL is seriously paving the way for affordable, more reliable, cleaner power for future generations.

We have had enough of the nonsense surrounding BPL.

The Cabinet should tell the board of BPL that this is not a tolerable situation for the public.

Consultation, transparency and accountability must be the order of the day.

If the public is to pay in the absence of these, then the government must be prepared to pay as well.

The prime minister said when selling his VAT hike, “I prefer to lose an election than lose a nation.”

One wonders if he is willing to make that same bet on the advice of the board of BPL.

Juan McCartney

Broadcast Editor at The Nassau Guardian
Juan McCartney is the senior editor of The Nassau Guardian.

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