Singapore has been chosen to list Bahamas Power and Light’s (BPL) $535 million rate reduction bond (RRB) and an engagement letter for such has already been executed, Minister of Public Works Desmond Bannister said yesterday.
Bannister, who gave the update on the bond during his contribution to the 2020/2021 annual budget, said the bond will be executed once the markets, which were affected by the coronavirus (COVID-19) outbreak, reopen.
Citibank is BPL’s lead manager for the issuance of the bond.
“For the past year, BPL and its advisors have worked to complete this transaction with much assistance from the government of The Bahamas,” said Bannister.
“The bond quantum amount of $535 million was recently approved by Cabinet and the use of proceeds rubric has been adjusted to reflect this. In addition, Singapore has been approved for listing the bonds and an engagement letter has been executed. The boards of BPL and the Bahamas Rate Reduction Bond Limited continue to work, along with company executives, to be in a state of readiness once the markets that were impacted by COVID-19 reopen, so that the transaction can be brought to a favorable conclusion.
“The positive momentum for the RRB prior to the COVID-19 pandemic has not dissipated. The change in circumstance means only that BPL must wait for a more favorable market window to open in order to put the bond to market.”
Bannister reiterated that the charges that Bahamians will face to repay the bond will be offset by a reduction in the fuel charge, thereby making that national utility investment charge (NUIC) rate-neutral for BPL customers “within six to ten months of its introduction”.
“What this means in simple terms is that compared to 2018 rates, with a number of assumptions, the increase in cost that will result from the addition of the charge will be offset by savings derived from fuel savings and increases in efficiency and management of resources,” he said.
“The inefficiencies of our national electrical utility in the past are coming to an end and BPL is at last on a path that will lead to self-sufficiency and an end to government subventions.
“One of the major planks in the new strategic direction is the decision to go out for the rate reduction bond. Let me say here that the establishment of the strategic plan and the alignment of the company’s activities – from spending to personnel decisions – has positioned BPL to maximize the positive impact to be derived from the bond.”