By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The company poised to take over New Providence’s electricity grid closed its initial financing with an “oversubscribed” $100m bond raise amid ongoing concerns over the deal’s structure.

CFAL, which acted as placement agent and adviser to Bahamas Grid Company’s latest capital raise, confirmed that local investor demand for the bond offering exceeded the target sum although it gave no indication as to whether the excess will be retained to fund much-needed improvements to the island’s transmission and distribution network.

Angelo Butler, CFAL’s manager of corporate advisory services, said in a statement: “The bond offering was extremely successful. Due to strong response, we reduced allocations for some institutional investors to ensure all retail investors were accommodated.”

Capital markets sources, speaking on condition of anonymity, said there had been little doubt that the two-week offering - which closed on Friday, July 2026 - would hit its $100m target and be fully subscribed due to the attractive rate of return and structure of the deal.

The $100m Bahamas Grid Company bond issue carries an 8 percent interest rate coupon, thus providing investors with a return some 3.75 percentage points above Bahamian Prime and much higher than the minimal deposit rates being paid by commercial banks. Also attractive is the monopoly nature of Bahamas Grid Company’s business and the minimum 25-year deal it has with the Government.

“Bahamians will always go for the rate. They don’t care about anything else,” one source said. “There’s going to be a lot of work going on very quickly. They [Pike Electrical] must have about 50 trucks on the island already.”

Bahamas Grid Company and its management firm, Island Grid, can now pair the $100m in bond debt capital with the $30m in equity previously raised from private investors to complete the $130m in financing it was targeting to complete “foundational upgrades” to the transmission and distribution network it now controls.

Eric Pike, Island Grid’s principal, also heads Pike Electrical, which will supply the manpower, materials and resources to effect the New Providence energy grid’s transformation. The arrival of Pike-branded bucket trucks signals their intention to make aggressive progress given that the bond offering document said a 2024 third quarter start is critical to meet the initial 2025 second quarter completion.

But, while Bahamian businesses and households will likely care little if the Government’s Bahamas Power & Light (BPL) and wider energy reforms result in cleaner, more sustainable and cheaper energy with outages much-reduced if not eliminated, questions continue to be raised over the deal’s structuring - especially on the transmission and distribution side.

With concerns already raised over whether The Bahamas is getting the best energy costing and other terms due to the seeming lack of competitive bidding on both the baseload generation and grid contracts, one financial analyst again questioned the Bahamas Grid Company equity split and how this had been calculated.

“The Bahamas government is contributing assets - the existing transmission and distribution network - worth an assumed $100m for 40 percent ownership of Bahamas Grid Company. This implies a value of $250m for 100 percent of Bahamas Grid Company,” they wrote in a note seen by Tribune Business.

“However, private investors and the new manager of the grid, Island Grid, have been given the opportunity to purchase 60 percent of Bahamas Grid Company for $30m. Based on the assumed value of $250m for Bahamas Grid Company, the value of 60 percent of the entity would be $150m, not $30m. 

“The private investors are essentially under-paying by $120m if you assume that all shareholders should pay the same amount for their equity position. A majority interest would typically be a premium over a minority interest so it could be argued that the private investors should have paid even more than $150m for the 60 percent interest.”

Having argued that Bahamas Grid Company’s owners under-paid by 80 percent for their equity, the analyst argued that the company appeared to have been set up solely to facilitate the transfer of BPL’s New Providence energy grid “and the associated profits into the hands of a few wealthy investors”.

Tribune Business previously reported similar questions given that the Government/BPL are getting the minority interest despite seemingly contributing more via the $100m “book valuation” of New Providence grid assets. By contrast, the private investors are gaining a collective 60 percent majority stake via just a $30m equity investment.

Equity means that investors are contributing their own money to a project. However, several Cabinet ministers have valued the private sector’s 60 percent at $130m by adding the $100m bond raise to the $30m equity capital. Given that bonds are a form of debt, since capital is being borrowed from investors and lenders, several sources have privately told this newspaper the $100m cannot be treated as equity.

As a result, they have suggested that the Government/BPL interest is really $20m, not $100m, so as to produce the 40/60 ownership split at Bahamas Grid Company in favour of the private sector. The $100m “book value” assets transferred to Bahamas Grid Company from publicly-owned BPL have also now been used as leverage to raise the $100m in bond debt capital.

“What these guys have done in effect is give BPL away to private interests, no if’s, and’s and but’s,” one energy industry source said. “They’ve papered it up but, in effect, it’s a give away of assets with a replacement value of $500m for a ‘book value’ of $20m.”

However, the Government may have had little choice but to make the grid deal as sweet as possible so as to attract the necessary private capital and investors to do the job. It has repeatedly stated that the cash-strapped Public Treasury and BPL do not have the ability to raise the financing to address the latter’s $1bn needs - $500m in capital upgrades, and the same amount in legacy debt.

Via this structure with Bahamas Grid Company, the Government and Bahamian taxpayers do not have to spend a single $1 up front and also avoid having to provide a government guarantee. Questions, though, will likely continue to be asked over whether it was necessary to transfer the New Providence grid to private control as opposed to a pure management contract with the same responsibilities.

The financial analyst, meanwhile, writing on condition of anonymity, said the deal had almost been made risk-free for Bahamas Grid Company’s investors/owners. Besides the generational nature of the deal, with a 25-year contract that has a ten-year renewal option, the bond offering document also details the “waterfall” payment structure.

This, they and others confirmed, means Bahamas Grid Company gets its revenues - equal to 5.5 cents per kilowatt hour (KWh) from all customer billings for the first five years - first before any other payments are made to BPL, its Bahamas Utilities Company generation partner, and others.

“Effectively all the risks associated with the generation and distribution of power is retained by BPL - the Government and the public,” the analyst wrote. They added that while Bahamas Grid Company’s revenues remain constant, the Bahamian people and government - via BPL - will bear the burden if the latter’s revenues decrease or costs rise.

Turning to Bahamas Grid Company’s projected profits, which are forecast at $10.419m for the entity’s first year rising to $13.677m, the analyst added that if these targets were hit - and net income all transferred to retained earnings, the $30m equity investors will effectively make their money back in five years ($6m-plus share of the profits annually) to leave them with a minimum 20-year profit run.

However, Bahamas Grid Company is only one part of the Government’s energy reforms. It is impossible to pass judgment on the deal until more is known about the generation side with Bahamas Utilities Company, the FOCOL Holdings affiliate, especially on the price it will see power to BPL at, the length of its power purchase agreement (PPA) and the costs to construct an LNG pipeline.

CFAL’s statement said that, after the initial upgrades are completed, Bahamas Grid Company will continue to repair and maintain poles, wires, and substations on New Providence, partnering with BPL “to enhance the reliability, resiliency, affordability, and sustainability of power for all residents and businesses on New Providence”.

A Bahamian political group, the Bahamas Constitution Party, also plans to challenge the BPL deal in the courts on the grounds that the Government failed to consult with the Bahamian people as required by the Electricity Act 2024 and Utilities Regulation and Competition Authority Act 2009.