Energy saving solutions firm outlines concerns on BPL rate reduction bond

WMS Holdings Limited, a Bahamian consulting company specializing in energy saving solutions and and cutting-edge smart technologies, is contending that if the government were to move forward with rate reduction bond as envisioned by Bahamas Power and Light’s (BPL) previous board of directors, the costs leveled on Bahamians as a result of the price of the bond will usher people off the grid and cause more homes to fall into arrears as rates increase, the company stated in a critique of the bond.

WMS is concerned that the government’s review of the bond through accounting firm Deloitte could signal that the bond offer is on the table for funding BPL’s legacy debt and infrastructure upgrades. While Minister of Economic Affairs Michael Halkitis proclaimed recently that the bond is dead in the water, WMS is of the opinion that it is still under consideration.

The company has been vehemently against the “unnecessary” 25-year tax commitment the bond would mean for Bahamians, especially given the country’s rising national debt and a looming increase in BPL rates.

“At the present time, there is a large, growing segment of middle-class customers who are considering accepting or even challenging the penalty that is associated with coming off the grid,” WMS stated in its critique.

“Their numbers have shown that it is still to their benefit now and in the long run to accept the penalty. Either way, BPL’s consumption analysis will not materialize and the number of customers opting to go off the grid will be substantial.

“The government’s support for renewables makes this a more certain reality post-September 16th, 2021. This is an extremely risk averse transaction. Such a decision will increase the upper middle class consumer’s appetite to become less grid reliant. As a result, there stands the possibility for a higher-than-anticipated number of departures from higher-consumption customers.

“A mere 15 percent to 20 percent decline in the customer base makeup would have a disastrous impact on BPL’s financial stability. Should this become a reality, the travesty will be that the bond taxation, which will still be required, will become the burden of the smaller remaining number of customers (mostly lower income, middle class, small and medium-sized enterprises and Over-The-Hill communities).”

WMS is concerned that the bond repayment could fall on the backs of the people who already cannot afford to keep their electricity on.

“This also means the 8,000 to 12,000 Bahamians that were turned off may not return, or those numbers will increase,” WMS stated.

The company added that BPL is running out of time to raise money to fund its legacy debt, adding that the Bahamian people will likely want an option for funding and improving BPL that is more fiscally prudent for the country and its people.

WMS asserts that the government would be better served opting for a public-private partnership to improve BPL, than dropping more debt into the struggling power company.

The company also criticized the inability of BPL’s former board to close a deal with Shell North America on a power purchase agreement.

“It can be argued that a key component of the former board’s legacy is tied to their inability to effectively bring closure to this bond and Shell North America’s original, now expired, MOU,” the company noted.

“Based on past BPL financials released in Parliament (March 31st, being BPL year-end), BPL’s September 30th, 2020 year-end financials are yet again stale-dated. Any lender would be ill advised to process a transaction of this magnitude with statements that are beyond six months old. The predicament that BPL now faces is that its legacy debts may become due or may be already past due.”

WMS also proposed that  the bond’s offering memorandum would require BPL’s major customers to pay their power bills “directly into an account or possible special purpose vehicle controlled by the bond holders (that can even be outside The Bahamas)”.

“The aforementioned has been submitted based on an independent assessment of BPL’s performance history as a utility, the existing market conditions and the future economic outlook for The Bahamas, the government and the world post COVID-19,” WMS stated.

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source https://thenassauguardian.com/energy-saving-solutions-firm-outlines-concerns-on-bpl-rate-reduction-bond/