Grid handover for 40 percent

Electric network to be exchanged for share in private company


Tribune Business Editor

The government is set to hand over New Providence’s electricity grid to a private company in return for a 40 percent ownership interest in that entity, Tribune Business can reveal.

Multiple sources yesterday told this newspaper that the plans to overhaul Bahamas Power & Light’s transmission and distribution network involve the creation of a new entity called Bahamas Grid Company.

This will be structured as a public-private partnership (PPP) 60 percent majority-owned by private investors. The government, which will own the remaining 40 percent, will gain its equity ownership interest by transferring BPL’s New Providence electricity grid - which includes sub-stations, transformers, poles and wires - to Bahamas Grid Company.

The effort to transform BPL’s transmission and distribution network, of which “critical parts.... are on the verge of collapse” according to Prime Minister Philip Davis KC, is thus far more complex and involved than the reform strategy outlined by the Government in unveiling its “new energy era” on Monday.

Island Grid, which was identified as BPL’s transmission and distribution partner, will manage Bahamas Grid Company. It is understood that the latter hopes to complete the initial phase of its work by the 2025 first quarter’s close at end-March next year if it can get moving quickly.

Well-placed sources said Bahamas Grid Company is in line to receive a 25-year contract to manage and upgrade New Providence’s transmission and distribution network under a proposed Heads of Agreement with the Davis administration that has yet to be signed.

They added that its investors - both private and the Government - will gain a return on their investment through a portion of all revenues billed and collected by BPL being allocated to Bahamas Grid Company. A portion of this sum, said to be 5.5 cents per kilowatt hour initially (kWh), will also be used to help pay-off legacy BPL debts estimated at around $500m or half a billion dollars.

These details have emerged after offering documents were issued to Bahamian investors as part of Bahamas Grid Company’s bid to raise $30m in equity capital via a private placement - a deal that was exclusively revealed by this newspaper on Monday.

The $30m equity raise is one component of the $130m in initial financing that the New Providence energy grid reform effort requires, with the remaining $100m likely to involve preference shares or some other form of debt security.

Transferring BPL’s New Providence electricity grid to Bahamas Grid Company in return for 40 percent ownership in the latter makes sense for the Government as it does not have to find a single dollar in liquid cash for its equity contribution amid its ongoing fiscal squeeze. It also enables it to have direct input and influence over upgrading the transmission and distribution network, and how this process rolls-out.

It is also understood that the deal is not a sale of BPL’s New Providence grid. Rather, when the 25-year arrangement with Bahamas Grid Company and Island Grid expires, it is thought likely that the network will revert back to government and BPL ownership.

If the transmission and distribution upgrades are executed according to plan, BPL and its customers are initially forecast to enjoy annual savings between $10m-$30m due to a combination of less frequent outages and reduced electricity losses from overhead lines.

Tribune Business was told that the enhancements are also designed to resolve voltage fluctuations responsible for frying electrical equipment, and will ultimately increase the electricity grid’s carrying capacity by 172 Mega Watts (MW) while also making it easier to integrate large resort developments and other projects that will add significantly to New Providence’s load demand.

Several hundred jobs - thought to be around 200 - will likely be created during the transmission and distribution build-out phase with BPL staff in line to get first crack at these posts. They will probably work with overseas transmission and distribution workers provided via Pike Electrical, the Carolinas-based specialist with which Island Grid is affiliated.  The latter is likely to receive a management fee for its services.

Island Grid’s website lists its co-chief executive as Eric Pike, who is also chairman of Pike Corporation. That is the North Carolina-based energy transmission and distribution specialist, which was named by Kyle Wilson, the Bahamas Electrical Workers Union (BEWU) president, as the entity set to take over management of BPL’s grid via a public-private partnership (PPP) deal with the Davis administration.

The company’s website shows it is headquartered at Shipston House in Lyford Cay. The Shipston Group was founded by the late world renowned investor, Michael Dingman, and David Dingman is named as an Island Grid director on the company’s website.

Island, which bills itself as “bringing 60-plus years of US infrastructure and implementation expertise to islands around the world”, also showcases work done for Grand Bahama Power Company and the private developers at Walker’s Cay in the Abacos (Carl Allen) and Jack’s Bay in Eleuthera.

Mr Pike has also previously been named as an investor and equity partner in the Jack’s Bay development, which is chaired by Sir Franklyn Wilson, chairman of BISX-listed FOCOL Holdings. FOCOL’s subsidiary, Bahamas Utility Company, has been named as BPL and the Government’s generation reform partner for the “new energy era”.

Island Grid describes itself as “a one-stop shop for infrastructure services”, offering engineering, construction, project management, advisory, training and even marketing solutions for its clients.

Jobeth Coleby-Davis, minister of transport and energy, told the House of Assembly in early March that a $130m investment is required to upgrade BPL’s New Providence transmission and distribution network “in the next two years alone”.

And, on Monday, she said: “BPL’s transmission and distribution infrastructure is in desperate need of upgrades as much of it dates to the 1980s and early 1990s with few enhancements to reduce significant system losses. BPL’s present infrastructure is crippled by the effects of climate change with soaring temperatures and natural disasters having a detrimental effect on the company’s assets....

“The partnership with Island Grid will extend the infrastructure capabilities beyond what BPL alone can do by bringing in a generation and transmission and distribution network expert to pursue much-needed upgrades. The partnership with Island Grid will lower the fuel cost, and improve operating efficiency. The benefit of this arrangement will be felt through affordable energy prices and fewer power interruptions....

“The upgrade of the grid will bring about a more efficient delivery of power, so less energy is wasted getting the power from the generation plant to your home. A well-built and well-sized system will allow for lower ongoing maintenance costs than what we currently have today. All these savings will be passed along to customers.”

Affirming the Government’s expectation that this will produce improved reliability, Mrs Coleby-Davis added: “The transmission and distribution work is designed to improve reliability along several dimensions - the addition of a new switching station and a new transmission line and proper looping of the system, reconductoring work, substation protection upgrades and targeted distribution protection schemes and voltage regulation.

“These are foundational to the reliable operation of any transmission and distribution system and are currently in urgent need of attention.”


Porcupine says...

So the ones who drove BEC / BPL into the ground will be the first to be rehired by this new venture.
And, when again. will the power outages end and consumer bills come down?
What percentage of the population will still be alive?

Posted 12 June 2024, 11:18 a.m. Suggest removal

Bonefishpete says...

New boss same as the old boss. I think there's a song about that.
Has Pike even thought this through?

Posted 12 June 2024, 6:36 p.m. Suggest removal

JohnBrown1834 says...

This is very confusing:
1. It seems that Pike alone will be responsible for transmission and distribution. They are not bringing any new money but will source the $130 million needed from local investors. That is very odd. If that is the case we might as well just let a local company do the same.
2. Pike will manage the company and will get a management fee. They will manage to return a profit therefore their staffing will be low.
3. They only need 200 employees which will be both local and foreign. In 2015, BEC staff count was around 1,200 employees. It is probably much more now. Most of them are in the transmission and distribution area. So, we could expect massive separation packages.
4. It seems that FOCOL will manage the supply company. What is unclear is how the LNG plants will be financed. Seems like the government is stuck with that bill.

Posted 12 June 2024, 11:10 p.m. Suggest removal

trueBahamian says...

Why does this seem like a game of smoke and mirrors? This while deal needs to be spelt out in detail to Bahamian taxpayers.

Posted 13 June 2024, 12:30 a.m. Suggest removal

ExposedU2C says...

This most daft and corrupt Davis led PLP government is handing over to the greedy Snake and his band of local and foreign cronies the entire energy sector of our small nation without any regard to the national security implications of doing so.

And this most reckless and dangerous privatisation is being done under the pretense of a Public-Private-Partnership that will benefit the Bahamian people. nothing could be further from the truth! All the monopolistic profits from this sordid arrangement will go the greedy Snake and his cronies, leaving all the socialized costs to be by Bahamian taxpayers through extremely high and unaffordable electricity rates.

The mere fact that the rate setting process will be taken away from URCA and placed in the hands of the glaringly incompetent Jobeth Davis as minister of transport and energy really says all there is to say here about this most corrupt give away of our country's energy sector. And Jobeth has made it known that the wealthy gated communities need to pay much higher electricity rates so that less fortunate Bahamians and the PLP government's cronies can pay much lower rates, if anything at all!!!

Posted 17 June 2024, 1:25 p.m. Suggest removal

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