By Gerrino J. Saunders

Journal News Editor 

The Progressive Liberal Party (PLP) came to office with a clear and ambitious vision to reform the nation’s energy sector, and since 2021 it has taken on a number of bold initiatives including rebuilding the electricity grid on New Providence, taking steps to transition to liquified natural gas (LNG), entering a number of power purchase agreements that will largely rely on renewable energy to power Family Island economies and the latest move which was to purchase majority ownership of the Grand Bahama Power Company.

The latter has drawn some criticisms with concerns that the government may be biting off more than it can handle, especially when considering the financial and operation challenges at Bahamas Power and Light (BPL).

This week in Parliament the government took steps to refinance $131.8 million in existing GBPC loan obligations alongside broader energy refinancing resolutions. 

On the 23rd of March this year, Parliament approved a resolution authorising the Government to guarantee the borrowings of the Grand Bahama Energy Company (GBEC) through a US$200 million syndicated loan with Standard Chartered Bank and Scotiabank (Bahamas) Limited.  The Grand Bahama Power Company also had existing loan facilities totalling $131.8 million dollars.

“The Resolution asks this House to authorise the Minister of Finance to borrow for the purpose of refinancing those facilities, which together amount to $331.82 million,” said Mr. Davis. 

Continuing he said, “The Minister may do so through Government loan agreements or lines of credit, through the issue of securities, or through other debt instruments. I want to be precise at the outset, because precision has been in short supply in some of the commentary of recent days.  This resolution is not about adding new debt, authorising new spending, or buying a new asset. 

“This resolution will allow us to take debts that already exist at commercial bank rates, and asks this House to allow us to place them on better terms within our national debt portfolio, where they can be managed with the scale and discipline that we manage our sovereign liability.”

The Prime Minister explained that as part of the Government’s broader debt financing exercise for this fiscal year, the Ministry of Finance is preparing to approach the external bond market for a facility sized to meet both the central Government’s refinancing needs and the Grand Bahama obligations. 

He said, “By consolidating them in that exercise, the Government expects to reduce annual debt service and to secure certainty about future interest payments.  Any Bahamian family that has consolidated several expensive loans with a single loan will recognise the logic. The benefits to the two companies are considerable.” 

The Prime Minister argued that, “Once these facilities are retired, the Grand Bahama Energy Company will be left with only its working capital facility to service, which substantially reduces its debt burden and improves its financial flexibility. 

“The Grand Bahama Power Company will shed significant debt service costs, and savings that would have otherwise gone to the banks can be directed instead to the maintenance, operational improvements and capital works on which the people of Freeport, Eight Mile Rock, West End and East Grand Bahama depend. A utility relieved of that weight should require less support and fewer subventions from its holding company, which is the outcome every taxpayer wants.”

The Prime Minister reminded that the government’s goal is to have every Bahamian household and business, on every island, to have power that is affordable, reliable and increasingly clean. 

He said, “We want a resilient electricity system that we can rebuild quickly after a hurricane comes to our shores, that no longer rises and falls with every movement in world oil markets, and that becomes a reason for investors to choose The Bahamas rather than a reason to look elsewhere. That ambition carries a price, and this administration has chosen to embrace it.”

“The reform programme we set out carries more than $1.1 billion in targeted investment, with $820 million directed to New Providence and $324 million to the Family Islands. The acquisition of the Grand Bahama Power Company was a part of that ambition, and so is the resolution now before the House,” said Mr. Davis.

According to the Prime Minister the resolution is grounded in the Public Debt Management Act, 2021, which authorises the Minister of Finance to borrow for the purpose of refinancing existing public debt and which requires that certain changes in the form of the public debt come before Parliament. 

“The Government,” he said, “Is therefore seeking the authority of this House, as the law requires and as good governance demands.”

In response to concerns raised by the Opposition who asked why the government first guaranteed the acquisition loan and now proposes to refinance it as direct debt. 

Mr. Davis said, “It is a fair question, and the answer is straightforward.  In March, our priority was to complete a transaction with a willing seller on a timetable that protected the people of Grand Bahama, and a guaranteed bank facility offered the fastest and most certain route to closing. The sale closed on the 12th of May.  The sensible next step is to replace short-term commercial financing with longer-term financing at the lower cost the sovereign can command.”

He further explained that a rating agency whose report Opposition members have quoted expressed concern about contingent liabilities sitting outside the government’s direct accounts, and by bringing these obligations onto the Government’s own books, in full view of the Parliament and the public, the government is addressing that concern openly.

Turning to the working capital for GBPC the Prime Minister said the public has been told something that is inaccurate.

He said, “It has been reported that the $80 million approved by Parliament has vanished, that the Grand Bahama Power Company has received nothing, and that critical repairs and battery storage have been put on hold. 

“I understand why those reports troubled the employees of the company and the businesses of the island, and I respect the people who raised their concerns. The facts are these. An $80 million working capital facility is available at the Grand Bahama Energy Company. The Grand Bahama Power Company received its first disbursement from that facility in the third quarter of this year, and it will receive further disbursements as they are required. 

“A well-run facility is drawn down as the work demands, in the way a careful manager uses a line of credit, rather than emptied on the first day to sit idle and accrue interest. Since the Equity Rate Adjustment took effect following the close of the sale, no capital project at the Grand Bahama Power Company has been paused or cancelled for lack of funding,” said Mr. Davis.

In conclusion the Prime Minister said the acquisition did more than bring a utility into public hands. He said, through the GBEC, it created the instrument that will bring coherent strategy to the whole of our public electricity sector. 

He said, “The Government has since expanded the company’s mandate beyond its role as parent of the Grand Bahama Power Company to include corporate oversight of all the Government’s interests in the public utilities, Bahamas Power and Light among them. The Grand Bahama Energy Company will set enterprise-wide strategy, policies, standards, frameworks and controls, while Bahamas Power and Light and the Grand Bahama Power Company remain accountable for implementation and operational performance. 

“It will provide fuel hedging and procurement, asset management, long-term capacity planning and procurement, consolidated financial reporting to the Government, debt management, capital allocation, risk management, governance and compliance, and capacity building.  The wider programme is moving forward on every front,” said Prime Minister Davis. 

He challenged every Member of Parliament who voted on the resolution to weigh the alternative, because the choice before the nation is between investment and the status quo. 

He said, “The status quo means remaining almost entirely dependent on imported fuel, with fuel alone accounting for around half of the total power bill. Until this administration acted, renewables supplied barely a fraction of one percent of our power, and the grid still loses more than a tenth of what it generates before it reaches a customer.”

“The status quo also means the Grand Bahama of 2024, when ageing engines failed, load shedding became routine, and residents were asked to accept a rate increase in the midst of the outages. It means remembering that Hurricane Dorian inflicted more than $130 million in damage on our power sector and flooded the generating plant on Grand Bahama, and then rebuilding the same vulnerable system in the same vulnerable way.” 

“And it means telling every investor who considers Freeport or the Family Islands that the cost and reliability of power will remain a reason to go elsewhere. This Government will not accept that status quo. We will not leave the next generation an energy system that was already failing the last,” proclaimed Prime Minister Davis. 

He noted that there will be days when the grid falters while it is being rebuilt, and when that happens the government will say so and they will fix it. 

“I would rather this Government be judged on the courage to build than excused for the comfort of standing still and this Resolution is a careful and responsible step within that larger programme,” said Mr. Davis.