By FAY SIMMONS

Tribune Business Reporter

jsimmons@tribunemedia.net

The Prime Minister yesterday defended his administration’s decision to outsource New Providence’s electricity grid to private investor control while revealing the deal will be finalised in “about another week”.

Philip Davis KC, speaking at his office’s weekly media briefing, said transferring the capital’s energy grid to Bahamas Grid Company, a special purpose vehicle 60 percent majority-owned by undisclosed private investors, will deliver consumers a 50 percent saving on Bahamas Power & Light’s (BPL) transmission and distribution network.

“We have about another week before it’s completely finalised,” said Mr Davis said of the agreement with Bahamas Grid Company. “The fundamental structures have been agreed upon, and it’s just the operational details that are now being worked on.

“For example, we would want some key performance indicators included in the operational agreement. Let’s say, for example, on the transmission lines, it is indicated that we’ll have at least a 50 percent savings that we should see passing on to consumers. That is the representation. For example, we want that as a KPI (key performance indicator) if that is not achieved. There ought to be consequences.

“Those are some of the details we are talking about that are across all of the gamut of this arrangement. So, we’re making sure that whatever we do at the end of the day it is the Bahamian people and the consumers that are benefiting,” the Prime Minister continued.

“So those details are still being worked out. Hopefully by next week we should be able to indicate that it has been done and, in the appropriate time, we will be, of course, making sure that the details that are required to the public will be made public.”

Mr Davis added that he would have “no objection” to tabling the agreement with Bahamas Grid Company in Parliament, adding: “We have no objection to doing that. I could do that.” The Government itself holds the remaining minority 40 percent ownership interest in Bahamas Grid Company, which it gained by contributing BPL transmission and distribution assets valued at $100m.

While most would view the present BPL and energy industry status quo as untenable, especially if the Government’s reforms deliver the promised consumer savings and improvements, questions remain over the deal with Bahamas Grid Company and its manager, Island Grid, which have hired US-based Pike Electrical to lead the grid upgrades. Eric Pike, Pike Electrical’s chair, is also an Island Grid and Bahamas Grid director.

The concerns include the Government’s decision not to put the grid deal out to competitive bidding, which means it cannot be certain that it has obtained the best possible arrangement, especially given that this is a generational deal given the 25-year lease that Bahamas Grid Company will obtain with an option to renew for a further ten.

Bahamas Grid Company’s owners have obtained their 60 percent equity interest with a combined investment of $30m, compared to the $100m of assets contributed by the Government for its 40 percent minority interest, leading some observers to argue that the size of each group’s stake should be the other way around with the latter in the majority.

Queries have also been expressed over why the Government has elected not to go with a simple management agreement, or build, own, operate and transfer (BOOT) arrangement, that would see Bahamas Grid Company hand the transmission and distribution network back to BPL at no cost when its lease has expired.

Instead, the Government can buy it back at ‘fair market value’, which some persons have likened to a so-called ‘poison pill’ designed to deter future administrations from seeking to unwind the deal, because it will never have the financing to fund this.

Mr Davis, though, defended the decision to transfer BPL’s grid assets to Bahamas Grid Company as opposed to contracting Island Grid and Pike Electrical on a management services contract to upgrade the transmission and distribution network. He signalled that the deal, which is effectively privatising New Providence’s electricity grid, had to be structured this way to make it attractive for private capital.

The Prime Minister indicated that the transmission and distribution network reforms will not cost Bahamian taxpayers or require a government guarantee, whereas it would have “put more pain” on the public purse had his administration elected to finance BPL’s combined $500m new investment needs itself.

“The amount of finances that’s required to transform BPL was not within the remit of this government in the context that, if the Government decided to go that route, we may have to look at how we increase taxes to the Bahamian people to pay for what we have to do,” said Mr Davis.

“We met BPL with a $500m legacy debt. To transform the transmission and distribution, and the other savings that is required, will need probably another $400m so we’re looking at near a $1bn investment. The way to do that is we have to bring in partners so as not to be able to put more pain on the Bahamian people through taxes, and we were able to negotiate that position.

“What we have done is we have gone into a partnership with Pike, and we have developed a partnership where the Bahamian people will be a part of that as well. We are headed to transfer the transmission and distribution to a special purpose vehicle that will own that transmission and distribution, but that ownership would still be with BPL. Other Bahamians will invest in that special purpose vehicle.”

Mr Davis said it is “disappointing” that BPL union leaders say they still have concerns related to the deal, and sought to reassure them that no jobs will be lost in the process and that the benefits and working conditions in their industrial agreements are safe.

“It is rather disappointing that we continue to hear these sorts of concerns when both union executives have been assured in meetings before that they need not be concerned about their workers, as we intend to ensure that we live up to our industrial agreement that workers jobs are secure, and there’ll be no change in their arrangements,” said Mr Davis.

“They will have a choice to go to this, the special purpose vehicle, or remain at BPL. And if they go there, and there’s some concerns about whether they want to be there, the door will be open for them to go back.

“Those details, I know that the minister [Jobeth Coleby-Davis] has agreed to have a transitional team that will meet with the units and address any of those issues. But they are assured that they need not be concerned about their job security, or whether or not provisions agreed upon in industrial agreements will be complied with.”