BPL’s dire financial position outlined in annual reports
Auditor reveals company’s continued negative cash flows, operational losses
In the first Bahamas Electricity Corporation (BEC) and Bahamas Power and Light (BPL) combined annual reports made public in five years, the power company’s dire financial position is outlined.
The 2016-2018 Annual Report and the 2019-2020 Annual Report were tabled in the House of Assembly yesterday.
KPMG, in its independent auditors’ report, points to the company’s continued negative cash flows, operational losses and impending maturities of all its obligations over the five-year period, as the basis that a material uncertainty exists that may cast significant doubt on the corporation’s ability to continue as a going concern.
As at June 30, 2020, BPL had $52.5 million cash, $49.9 million accounts receivable from the private sector and $71.6 million from government corporations, departments and ministries.
Total assets, including recoverable fuel charge, property, plant and equipment, amounted to $888.2 million, with liabilities equaling the same amount.
“The company’s objectives when managing capital are to safeguard its ability to continue as a going concern and maintain financing ratios in line with debt covenants. As of June 30, 2020 the company secured a $75 million bank loan with principal balance amounting to $45 million (2019: $60 million). The company should maintain on a quarterly basis for its loan covenants a tangible net worth of $450 million and maximum total quarterly funded debt to tangible net worth ratio of 1.0:1.0, and maintain a minimum debt service coverage ratio of 1.25. The loan was classified as a current liability as of June 30, 2020,” the auditors said.
“The company is exposed to a variety of risks including market risk (including foreign exchange risk and interest rate risk), credit risk, liquidity risk and operational risk arising in the normal course of the company’s business activities.
The company does not have any written risk management policies, however there are risk management guidelines. It is management’s policy to monitor the financial risks measures as considered necessary from time to time to minimize such financial risks.”
Last year, the government refinanced the $246 million bridge loan facility it assumed responsibility for in 2020 to cover BPL’s legacy debt.
BPL originally entered into a facility agreement for $211 million between lenders Bank of The Bahamas, Credit Suisse, FirstCaribbean International Bank, Royal Bank, Scotiabank and the National Insurance Board on October 2, 2009, amending it on December 14, 2014 and again on March 8, 2018.
A separate facility agreement was entered into on August 24, 2012 with FirstCaribbean International Bank for $35 million and reinstated in December 2014 and March 2018.
Both facilities were expected to reach their extended maturity dates on June 11, 2020, when they were due payable in full.