Bahamas Power and Light (BPL) Chairman Dr. Donovan Moxey said the company is still hoping to put its rate reduction bond (RRB) on the market before the end of this year, after putting it off in March due to the COVID-19 pandemic.
While BPL has previously said that Singapore has been approved for listing the $535 million in bonds, with an engagement letter having already been executed, Moxey said the corporation is still awaiting the conclusion of several legal/legislative matters under review.
Moxey noted that in the meantime, BPL is working to be in a position, so that once the markets that were impacted by COVID-19 reopen, the transaction can be brought to a favorable conclusion.
“So, the challenge that we’ve had with going to market with COVID-19 has been one where if you look at how our bonds are rated internationally, the risk profile of The Bahamas, because of the dependency on tourism and now the lack of travel, now you have it where finding a window of opportunity where you’re going to find a coupon rate or interest rate that makes sense for the Bahamian people long term, that’s a very difficult thing to find at this point in time,” he said during a press conference yesterday.
“So, when we talked about having a market window open, that’s what we’re looking for; a window where the market sees us as more favorable because things have changed with respect to COVID-19, and the perception of The Bahamas, in terms of our economy being able to rebound, is one where it looks positive. In that vain, one of the things that we’ve been doing actively as BPL is having discussions with our financial advisors, with respect to how do we now reposition what we’ve been doing with respect to the RRB, so that we can see other possible market windows that may allow us to go to market a lot sooner than one would expect.
“And so, we’re actively looking at ways in which we can reframe this particular opportunity, where the direct connection or perception of us being tied to the Bahamian economy isn’t as strong as it is now in the investment community.”
Last year, the government passed the Electricity Rate Reduction Bond Bill, 2019, in Parliament, which is
expected to help BPL refinance its $321 million legacy debt and raise another $350 million in new funding, to invest in new power generation.
However, the RRB was said to be delayed due to global economic instability as a result of the COVID-19 pandemic.
In May, Prime Minister Dr. Hubert Minnis tabled a resolution in the House of Assembly to allow the government to assume BPL’s debt as a term for the further extension of BPL’s loan facilities, which were expected to come due and payable by July 24, 2020.
The resolution covers up to December.
“We’re trying to get the RRB completed as quickly as we possibly can. Ideally, for us, we’d like to get it done before the end of of this calendar year. Given the fact that we are a government-owned entity, the government is committed to support BPL in any way it can and the government has been extremely supportive through the Ministry of Finance,” Moxey said yesterday.
“So, from our perspective, we see no reason why that support would not continue to occur. But what we’re trying to do is get BPL to the point where we don’t require those government subventions. We’re doing everything we can to figure out ways in which we can continue to become a much more fiscally resilient organization and not have to worry about the government’s Vsupport moving forward.”
Asked whether there is simply no appetite for BPL’s debt, as critics have opined, Moxey said, “When you look at this rate reduction bond, it is not structured as a normal corporate bond, where the repayment of that bond is based on the profits or the revenues directly collected by that particular entity.”
He continued, “Within the RRB, we’ve had Parliament approve the imposition of a charge on everyone’s bill. So, that particular charge that is associated with paying back investors, is covered in law. And so, when you talk about an appetite for BPL’s debt, what you’re taking on is a very different structure than what one would normally expect as part of a bond, which is a form of non-recourse financing, which means that that debt does not show up on BPL’s books. BPL, under law, has the ability to charge an additional fee to cover that debt.”