Friday, April 12, 2019
By NEIL HARTNELL
Tribune Business Editor
A prominent QC yesterday slammed as “below the belt” efforts by Grand Bahama Power Company’s owner to portray him as a “disgruntled” investor trying to extract a higher price for his shares.
Fred Smith QC, the Callenders & Co attorney and partner, pledged to Tribune Business he will “pursue to the bitter end” his Judicial Review challenge to Emera’s buyout of all minority Bahamian shareholders in that island’s utility monopoly.
Speaking after Justice Petra Hanna-Adderley this week set August 30, 2019, as the date she will rule on whether the Canadian utility giant should be allowed to “intervene” in the case and become a party to the action, Mr Smith said he simply wanted to “keep my shares” and receive “the same dividend” that Emera is now obtaining from GB Power.
Mr Smith’s company, SeSaChe Ltd, filed its Judicial Review action in late November 2017 in a bid to quash the government approvals that gave Emera the go-ahead to buy-out all GB Power’s local shareholders.
That transaction was completed on January 15, 2018, with Bahamian investors in BISX-listed ICD Utilities receiving either a cash payout or depository receipts giving them an interest in Emera in exchange for their shares.
ICD Utilities was subsequently de-listed from the local stock exchange, but Mr Smith and SeSaChe’s fight to retain their $300,000 equity ownership interest in GB Power locally - rather than through an Emera derivative - remains alive.
Emera, in legal filings obtained by Tribune Business, sought to challenge Mr Smith and SeSaChe’s claim that the case raises issues of public importance by arguing that the QC’s main motivation was simply to use the Judicial Review as leverage to obtain a higher price for his shares than that received by other Bahamian minority investors.
“The acquisition of the ICD Utilities shares relates to a few select members of society inclusive of the intended intervener [Emera] and the applicant [SeSaChe],” the Canadian utility giant’s attorneys, McKinney, Bancroft & Hughes, alleged.
“A shareholders meeting was held on November 8, 2017, and the resolution seeking to approve the transaction was approved by approximately 96.3 percent of the minority ICD Utilities shareholders. The applicant is a lone disgruntled minority shareholder who is attempting to extract a higher price for its shares.”
That claim yesterday sparked a furious response from Mr Smith, who told Tribune Business: “That was a below the belt, gratuitous, unwarranted and invalid statement. I do not want anything from Emera Inc.
“I simply want to keep my shares and receive the dividends at the same rate that Emera Inc is receiving them from GB Power, which is at about 37 percent per annum.” While providing no evidence to support this rate of return, Mr Smith said GB Power’s profitability was likely to soon experience a sharp upward spike if numerous multi-million dollar investment projects targeted at Freeport came to fruition.
Pointing out that the utility is also benefiting from the multiple tax breaks offered under the Hawksbill Creek Agreement, he added: “GB Power does not pay Business Licence fees, Customs duties, real property taxes and taxes on dividends, and is the most profitable, stable entity in the entire Emera subsidiary galaxy.
“That is why they pushed out all of the local shareholders and are now paying paltry dividends from Canada in comparison. I am not disgruntled. I am very happy to have my shares in GB Power, although I do not know what they have done with them. It was an investment in my future, and for my children.
“I intend to pursue this to the bitter end, and if they think someone trying to keep what belongs to them is somehow dishonourable, then I would like to know how they’d feel if the Government - using eminent domain - reclaimed GB Power for the Bahamian people.”
Mr Smith recalled how former Grand Bahama Port Authority (GBPA) and GB Power chairman, the late Edward St George, had guaranteed to himself and all other minority Bahamian investors “a minimum 10 percent return per annum” which was expected to continue growing.
“Now, with the advent of solar power, liquefied natural gas (LNG) and the expansion of the Freeport and Grand Bahama economy, the shares of GB Power are going to increase exponentially in value,” he added. “I simply wish to keep what belongs to me.”
Documents filed with the Supreme Court reveal that preparations for the buyout of all Bahamian minority shareholders in ICD Utilities began in earnest on March 21, 2017, with an internal proposal for an Emera affiliate, Emera Utilities Holdings Ltd, to acquire their shares.
Approvals for the transaction were received from the Bahamas Investment Authority (BIA) on July 13, 2017, with the Securities Commission confirming the following day its permission was not required. The Central Bank followed suit with an approval in principle on September 7 that year.
Final approvals from the BIA and Central Bank were secured on January 3, 2018, and January 11, 2018, respectively. While all this was going on, ICD Utilities’ three independent directors had met regularly with KPMG, their financial advisers, and attorneys, to determine the financial terms to be offered to Bahamian investors.
The independent directors recommended offering Bahamian investors either $8.85 per share in cash; 0.913 depository receipts per share, with each of these equivalent to 25 percent of an Emera ordinary share; or a combination of the two.
Emera’s legal filings added: “The consideration to be received on a per common share basis represented a premium of approximately 26 percent over the then-current trading price of ICD Utilities shares on the Bahamas International Securities Exchange (BISX), and a premium of approximately 33 percent over the volume-weighted average trading price of those shares on BISX over the previous 24 months.”
Mr Smith and SeSaChe, though, are trying through their Judicial Review action to have all the government permits issued to Emera for the minority investor buyout quashed.
They are alleging that the BIA and Central Bank approvals are “ultra vires, irrational and procedurally unfair”, and are seeking court Orders to block the Government from approving the buy-out without first consulting Bahamian shareholders and other “stakeholders”, such as the Grand Bahama Port Authority (GBPA).
They are arguing that since the BIA is not created by law it has “no authority over the personal shares owned by Bahamian citizens”, and thus has “no power” to approve Emera’s purchase of SeSaChe’s shares.