Bahamas outsources management of power company
The Bahamas government has approved an agreement for PowerSecure Inc of North Carolina to assume management control of the Bahamas Power and Light Company (BPL) for an annual base fee of US$2 million.
Deputy Prime Minister and Minister of Works and Urban Development Philip Davis said that the management-services agreement gives the energy company full responsibility for all electricity generation, transmission, and distribution, procurement, and customer service.
It has an initial term of five years, with the option for another five years based on mutual agreement by BPL and PowerSecure. Davis said PowerSecure will be required to prepare a business plan and financial model each year for approval by the board.
Under the agreement, PowerSecure will appoint two members to the BPL board, and the government will appoint six members.
In addition to its annual US$2 million fee, which will be adjusted yearly based on inflation, PowerSecure has the opportunity to earn a performance-compensation bonus of up to 150 per cent of the base fee.
Davis said that the agreement comes as The Bahamas continues its energy-sector transformation.
"Sixty per cent of our electricity bills were due to the cost of fuel. Notwithstanding the temporary relief to our pockets now, it remains urgent to continue pushing these reforms forward," he said in Parliament, noting that the cost and reliability of supply of energy have proven to be a deterrent to investors.
"Indeed, for many years now, Bahamians and investors alike have complained that energy costs are exorbitant. Apart from the cost of energy, the security and reliability of energy supply are also highly frustrating concerns. The single most important factor to driving down costs, that encourages investment, entrepreneurship, ownership, and security relates to electricity," said the deputy PM.
He also told legislators that The Bahamas Electricity Corporation (BEC) is a completely "unsustainable" operation and is unable to continue to operate under its present structure.
"Its disparate system design requires major capital investment of at least US$450 million over the next five years to resolve the many issues faced," he said.
"We also know that BEC continues to incur US$20 million to US$30 million in losses every year due to an archaic rate structure - a financial and operational situation that is impossible to sustain. In fact, the situation is such that BEC is now unable to obtain a credit rating, and, therefore, has no leverage with lenders or suppliers."