NASSAU, BAHAMAS – Bahamas Power & Light’s (BPL) Chairman Dr. Donovan Moxey said yesterday the decision to introduce a Rate Reduction Bond to refinance the utility’s legacy debt was due to a historical lack of success on loan repayments.
“Everyone says well why are we doing a rate reduction bond and not a loan,” Moxey said.
“We have not been successful in paying off loans. We keep kicking them down the road all the time.”
Moxey was addressing the Bahamas Institute of Chartered Accountants (BICA) Accountants Month conference at the Meliá Nassau Beach Resort.
He continued: “If you would look at the cost of doing a loan over 7- 10 years versus doing a bond offering over 20-25 years the actual cost to you in terms of impacting the customer over time is actually better doing the bond offering.
“Traditional debt has not worked for us and so it doesn’t make any sense to go that route.”
Moxey said the increases in electricity bills as a result of the bond will likely be mitigated by lower fuel costs.
“The goal we have now is at the end of the day what you will find and what we are working toward is that the net increase in your bill will be minimum or none and then once LNG comes on stream that cost will go down,” he said.
Last week, the Government tabled an Electricity Rate Reduction Bond Bill 2019 which will allow Bahamas Power and Light (BPL) to restructure more than $320 million in inherited debt, and secure more than $350 million in new funding to address longstanding issues.
The purpose of the ERRB 2019 Bill is to establish a legal framework for the organization of the Bahamas Rate Reduction Bond Limited (BRRBL) and the issuance of rate reduction bonds that will be secured by the property or other assets of the BRRBL for the sole purpose of indirect payment and satisfaction of the rate reduction bond financing liabilities.
The Bahamas Rate Reduction Bond Ltd, is the special purpose vehicle that will be responsible for issuing the bonds and making investor interest payments.
The legislation makes clear that BPL’s customer base will be relied upon to service the bond issue.
The legislation, which will replace a similar Act passed previously by the former Christie administration, provides that the bond fee paid by consumers can be adjusted at a minimum semi-annually to ensure that the collection of such fee will produce sufficient revenues to pay all ongoing financing costs as the same become due and payable.