Monday, April 15, 2019
By NEIL HARTNELL
Tribune Business Editor
Grand Bahama Power Company’s Canadian owner will suffer “substantial loss and damage” if a prominent QC succeeds in quashing the approvals to buy-out all Bahamian shareholders.
Timothy Eneas, a McKinney, Bancroft & Hughes attorney, argued before the Supreme Court that Emera should be added as a party to the Judicial Review challenge filed by Fred Smith QC and his company, SeSaChe Ltd, because it had most to lose if the action succeeded.
Should that occur, Mr Eneas warned it would result in a “mess” that he likened to “the unscrambling of the egg” where Emera would have to unwind the near-$35m buyout of Bahamian investors who had collectively held less than a 20 percent ownership interest in GB Power.
Pointing out that the transaction being challenged by Mr Smith and SeSaChe had already been completed in early 2018, Mr Eneas argued that Emera would itself become a “victim” if the duo succeeded in quashing the Central Bank and Bahamas Investment Authority (BIA) approvals that permitted the buy-out to occur.
“Emera has done everything that it was supposed to do,” Mr Eneas argued before Justice Petra Hanna-Adderley on April 9, 2019,” and it procured all of the necessary government approvals and it acted bona fide.
“And so Emera would say to you: ‘We are victims too’. And Emera would say the court needs to manage this fairly and justly if it is to be unravelled, and to permit Emera to extricate itself, if necessary, in a just and fair way.”
Emphasising Emera’s vested interest in the case’s outcome, and why it should be added as a party, Mr Eneas said unravelling the buy-out would require the Canadian utility to cancel the Depository Receipts (DRs) issued to many of the Bahamian shareholders while also re-issuing them with shares in GB Power and the former BISX-listed vehicle that held their interest, ICD Utilities.
Mr Smith and SeSaChe are resisting the addition of Emera to a case where the current respondents are the Prime Minister, minister of finance, Central Bank governor and BIA. Mr Smith last week promised he “will not seek to lock them out”, but argued that the Canadian utility giant should only have an “unrestricted right to be heard” and watching brief as it was not involved in issuing the approvals.
Disagreeing, Mr Eneas argued: “SeSaChe’s application in these proceedings seeks to impugn the transactions which resulted in Emera’s ownership, interest in ICD Utilities and the issuance of the depository receipts in connection with the same......
“Emera’s transaction is being attacked, and he is suggesting that they should come on the date and give their two cents and walk away. Emera would like to participate in discovery. Emera may have documents which may assist the Attorney General’s Office.
“Emera is entitled to insist that it be joined, and ought to be joined, in view of the fact that it is the party with the greatest interest at stake if SeSaChe is successful... If SeSaChe is successful the resulting Order would have the effect of invalidating the underlying transactions, thereby causing substantial loss and damage to Emera.”
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.
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).
And 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.
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.”