Bahamas Power and Light (BPL) has set its sights on completing its rate reduction bond (RRB) process – to raise more than half a billion dollars – before the end of the year, BPL Chairman Dr. Donovan Moxey said last week, adding that the utility company is awaiting parliamentary approval of amended legislation that would facilitate the RRB.
Moxey said he and BPL executives met with the Cabinet last week to appraise ministers on where in the process the company is regarding the RRB.
“The rate reduction bond is and continues to be a part of BPL’s funding strategy and debt reduction strategy,” Moxey told Guardian Business.
“That’s still in process, that’s still something that we’re working on. Obviously we’re trying to close that deal as soon as we possibly can.”
He continued, “To be quite honest with you, we’d love to get this deal done and completed before the end of the year, that’s our goal, that’s our focus.”
The $535 million BPL is hoping to raise is intended help pay off more than $300 million in legacy debt, as well as fund future capital projects.
BPL is seeking to go to international markets for the majority of its bond placement, at the same time that the government is seeking to source almost a billion dollars in foreign markets to bridge the gap between revenue – which is at a 35 percent shortfall – and expenditure.
Asked if BPL is concerned whether it will get favorable pricing, or if the timing of both bond placements may raise flags for investors, Moxey said, “No, not at all and the reason is that we are going after two different types of investors. Now obviously they’re going to look at us being a government entity and also the government of The Bahamas, but investors will look at that and they’ll compare both the deals. But when you look at the kind of investors we’re going after, they’re two different types of investors, so we don’t see a significant issue there, other than the fact that the government and a major government agency are out raising money at the same time.”
BPL originally planned to go to market in the first quarter of 2020, but held off after the COVID-19 pandemic sparked a global economic crisis and sent markets reeling. Then the power company sought to have the bond placed by February this year, but this was again delayed because the critical legislation that legitimizes the RRB placement expired and also needed amendments.
Moxey confirmed that while those amendments are complete the RRB is once again delayed, given that the government has suspended Parliament to the end of September.
“The amendments are done and completed, the amendments that we need. What people need to appreciate is that we’re doing a rate reduction bond for the very first time, it’s never been done as far as I know in any jurisdiction outside of the United States and Canada, it’s definitely never been done in the Caribbean. So what we want to make sure of, because of how the rate reduction bond is structuring, that that is materialized through the law itself,” he said.
“So if that is going to be the case the legislation definitely has to be purpose built. So we’ve had attorneys look over everything associated with the legislation inside out and we’ve ensured that all the necessary amendments are being made, in order to ensure that there is investor confidence in this deal. So we’re pretty happy with the amendments being made and it’s just a matter of getting it through the legislative process.
“Parliament obviously is out of session until September. So from our standpoint if they do not have a special session then we will have to wait until Parliament opens at the end of September. But in terms of getting this through the legislative process, we don’t see that as being a challenge at all.”
Moxey said despite the skepticism surrounding the RRB and the continued delays, BPL is committed to completing the capital raising process in its current form.
“Proceeds from the rate reduction bond will be utilized to invest in BPL’s capital infrastructure and so we want to be able to provide reliable electricity to the Bahamian public as soon as possible. Obviously we made the major investments in the generation facility two years ago. Now it’s about making investments in transmission and distribution,” he said.
“Obviously a lot of the outages you would have seen over the last couple of months are transmission and distribution related. So we really want to be able to make those investments in those networks as quickly as possible, so that we can really improve the quality of power that we bring to our customers.”
In May 2020, 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 by July 24, 2020. The resolution only covered up to December 2020.
The post BPL seeking to place rate reduction bond before year’s end appeared first on The Nassau Guardian.
source https://thenassauguardian.com/bpl-seeking-to-place-rate-reduction-bond-before-years-end/
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