Government tabled the updated Electricity Rate Reduction Bond Bill, 2019, yesterday, which will allow Bahamas Power and Light (BPL) to reduce its tariff rates to customers, fund its financial obligations and existing debt and establish an Electricity Infrastructure Disaster Fund.
The rate reduction bond is expected to help BPL refinance its $321 million legacy debt, by raising $350 million in new funding for BPL to invest in new power generation.
A press statement released by BPL yesterday on the tabling of the bill explained that the inflow of new money is expected to fund the installation of “modern power generation that is cleaner, more efficient, reliable and ultimately will lead to cheaper electricity costs”.
“BPL needs a smart injection of capital to allow the company to fix legacy issues and make strategic investments in the company’s assets, people, processes and technologies,” the statement read.
“The board acknowledges that it is essential to stabilize the cost of electricity and take the steps today to ensure the delivery of reliable, consistent power for all BPL customers.”
The bill calls for the formation of a non-profit entity that will manage the rate reduction bond processes through a board of directors appointed by the minister of public works, who are people outside of the employ or charge of BPL, the Utilities Regulation and Competition Authority, or the entity providing the rate reduction bond.
BPL Chairman Dr. Donovan Moxey said in the statement that the $321 million legacy debt has stifled BPL for years and kept the company away from meaningful investments.
“BPL’s massive debt is an anchor around our necks as we try to fix problems and invest in the future,” he said.
“The rate reduction bond bill will allow us to restructure the debt and access much needed capital after years of misplaced priorities and inadequate investment in the entity.”
He added that the debt refinancing and capital financing will lead to a reduction in costs for BPL consumers.
“Ultimately, this legislation will help lead to lower costs for our customers while allowing us to deliver consistent, reliable power to all Bahamians,” Moxey said.
“We wish to applaud those who have taken time to craft the bill, as this legislation will have a real and meaningful impact on the BPL customer base and the country as a whole.”
However, even BPL customers who choose to produce their own power or leave the grid altogether will still have to contribute their share monetarily to the rate reduction bond, according to the bill.
“As long as rate reduction bonds issued pursuant to the order remain outstanding, the rate reduction bond fee authorized in such order shall not be bypassed and shall apply to all customers whether or not customers generate their own electricity, and customers generating their own electricity may be required to pay a rate reduction bond fee with respect to such generation as authorized in the order,” the bill states.
Citibank has been engaged to advise BPL on its restructuring. Since August, it has been leading the company through the processes involved in the restructuring exercise.
BPL hopes to restructure its debt by the end of the year.
BPL announced in March that Finnish technology group Wartsila will install a new 132-megawatt engine power plant at Clifton at a cost of $95 million, to increase the generation capacity on New Providence. That station is expected to be operational by December 15.
In 2014, it was announced that the government planned to remove $450 million in legacy debt from BPL’s (then the Bahamas Electricity Corporation) books in a bid to allow the corporation to rationalize its expenses and improve its credit rating.
In August 2018, Minister of Public Works Desmond Bannister advised the BPL board that renewable energy and the rate reduction bond to refinance BPL’s legacy debt and liabilities were top priorities.