Thursday, January 11, 2018
By NEIL HARTNELL
Tribune Business Editor
THE Government has missed its “Holy Grail” by failing to tie approval of the $35 million GB Power buy-out to the utility “subjecting itself” to URCA’s regulation.
Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that the Government was “dumb” and “visionless” not to use the deal to achieve other key objectives, as he revealed the Supreme Court has given permission for his Judicial Review challenging the buy-out to proceed.
He argued that the Government should have imposed “a number of conditions” for approving the buy-out of all Bahamian minority investors in GB Power, and the de-listing from BISX of the utility’s 50 per cent owner, ICD Utilities.
Top among them, Mr Smith argued, should have been GB Power dropping its opposition - including Supreme Court actions - to being regulated by the Utilities Regulation & Competition Authority (URCA) rather than the Grand Bahama Port Authority (GBPA).
Besides allowing Bahamian shareholders to own shares directly in GB Power, the outspoken QC added that Grand Bahama’s monopoly utility should also have been mandated to publicly disclose its annual financial statements. “My suggestion, that the Government approve the transaction on a number of conditions, was a political and investor-friendly compromise,” Mr Smith told Tribune Business. “It would ave allowed those wanting to sell, and complaining of delay in approval, to receive their cash pay-out.
“I would have allowed those wanting to hold Emera Depository Receipts (DRs) to do so, and the third option - my suggestion - would have allowed Bahamians to continue to own shares, but this time directly in GB Power.”
The third option granted by Emera, now GB Power’s 100 per cent owner, was for Bahamian minority investors to take a combination of cash and DRs. Archibald Collins, GB Power’s president and chief executive, previously told Tribune Business that while direct Bahamian ownership in GB Power was an option it was never considered in structuring the buy-out offer given Emera’s desire to simplify the corporate ownership structure.
Those Bahamian investors who wanted to retain indirect GB Power ownership have simply exchanged their ICD Utilities shares for Emera DRs, the Canadian utility would argue, giving them access to a broader spectrum of investments and risk diversification as dividends/returns now depend on all its assets - not just one power provider.
Undeterred, Mr Smith argued: “It would have been in the national interest for the Government to have also conditioned the transaction on GB Power having to list on BISX and expand available ownership opportunities for Bahamians.
“Another condition would have required GB Power to be directly answerable to the Securities Commission, and required full, regular disclosure of the financial accounts of GB Power to be able to inform politicians, the Government and consumers about this extremely important foundational industry in Grand Bahama.”
ICD Utilities’ de-listing from BISX will likely relieve GB Power/Emera from the responsibility of having to disclose such detailed annual financial statements. GB Power’s Mr Collins previously suggested that the utility’s financials could be obtained from the GBPA, its regulator, but Mr Smith and others have expressed scepticism as to whether this will happen in practice.
“Another sensible condition the Government could have imposed would have required GB Power, because it operates outside the Port area in East and West Grand Bahama, to subject itself to URCA,” Mr Smith told Tribune Business.
“This has been the Holy Grail pursued by the Ingraham, Christie and now Minnis administrations, and has been resisted at every turn by GB Power. There is currently litigation between GB Power and URCA on this very issue.”
GB Power wants the Supreme Court to declare that it can carry on its business without requiring a public electricity supplier licence from URCA.
GB Power’s action is founded on the basis that, as a GBPA licensee, it is licensed and regulated by the latter via the Hawksbill Creek Agreement - and not by URCA and the Electricity Act 2015.
It is arguing that the Electricity Act’s sections 44-46, which give URCA the legal right to license and oversee energy providers, “are inconsistent, and conflict with, the rights and privileges vested in [GB Power] and the Port Authority” by the Hawksbill Creek Agreement.
Mr Smith’s suggestion that URCA become GB Power’s main regulator is significant. He is one of the staunchest defenders of the Hawksbill Creek Agreement (HCA) and its integrity, which in theory would be breached by URCA taking over the utility’s supervision, given that Freeport’s founding treaty vests oversight of such industries within the Port area in the GBPA.
However, many Freeport residents and observers will likely favour URCA taking over GB Power’s regulation, given lingering suspicions that the relationship between the utility and GBPA is too cosy due to the prior common ownership between the two.
“It was a wasted opportunity provided to the Government on a silver platter to negotiate for Bahamians to keep direct ownership in the Power Company,” Mr Smith argued, “and to achieve their political and regulatory objectives. I am shocked that my own government got nothing in return from Emera. That is simply dumb economic policies.
“This demonstrates how visionless the Government is. I am horrified that this government, which promised transparency and accountability, failed to consult with any of the affected persons before making their latest approval decision.
“It makes no business sense for Bahamians. Bahamians have a right to own a piece of their own economic pie, and this administration has completely betrayed the trust placed in them by the electorate.”
Mr Smith then warned Emera that he and his company, SeSaChe, will “not go quietly into the night” after obtaining permission on Monday from Supreme Court judge, Estelle Gray-Evans, to proceed with their Judicial Review action.
It is challenging the authority, and rationale, of both the Bahamas Investment Authority (BIA) and Central Bank in issuing the original approvals that allowed the GB Power buy-out to proceed.
Mr Smith said the Supreme Court also ordered the BIA and Central Bank to provide copies of the written approvals issued to GB Power/Emera, and stipulated that the production of all correspondence between the two sides be dealt with at a future hearing when all sides are present.
He added that he and SeSaChe may also launch Judicial Review proceedings against the Cabinet’s January 2, 2018, decision to give final approval to the buy-out once its reasoning was disclosed.
“I wish to assure Emera that SeSaChe and others will continue to fight for their shares,” Mr Smith told Tribune Business, “and will not go quietly into in the night.
“This is not a friendly investor manoevere, and it bodes ill for future relations between GB Power and Bahamian investors and consumers.” Around 96 per cent of Bahamian investors in ICD Utilities voted in favour of accepting Emera’s offer.