Prime Minister Dean Barrow told Amandala today,Monday, that his administration will prepay another $4 million to keep the nation’s lights on, as he— “one way or another”—tries to find a solution to the crisis Government has said is hovering over the head of the country’s premier power distributor, Belize Electricity Limited (BEL).
“It must be clear where this is headed,” said Prime Minister Barrow, declining to get into specifics.
One proposal that has been tabled is nationalization of BEL via a government buyback. When we first began to report on this story 11 days ago, Prime Minister Barrow had said he had no intention of executing a temporary takeover of BEL, under laws that permit an emergency takeover for 30 days with a possible extension.
Last Wednesday Prime Minister Dean Barrow declared BEL to be bankrupt, as it has called on the Government yet again to prepay $4 million towards its bill for street lighting, so that the company can meet its financial commitments to its Mexican supplier, Comisión Federal de Electricidad (CFE). Government will be about 4 months ahead in payments.
At the last report, BEL’s chief executive officer, Lynn Young, told us that the company holds $20 million in arrears to two of its main suppliers of power, and it was unable to meet those commitments.
Prime Minister Barrow told Amandala this morning that Government makes its last prepayment to BEL this week, and that will last another 20 days or so.
“We won’t give a penny more to BEL,” Barrow commented.
What happens if BEL doesn’t pay Mexico? Last week, Barrow indicated that the situation puts the country at risk of being disconnected from Mexico’s supply – a situation that could plunge the nation into blackouts.
On Friday morning Prime Minister Dean Barrow met with Young to discuss their options.
“The Prime Minister asked Mr. Young to convey to Fortis Inc., the majority shareholder in BEL, the Government’s interest in purchasing majority shares in BEL so as to assume control of the company,” said a press release from the Government. “Mr. Young undertook to immediately relay this message to Fortis Inc. and to convey their response as soon as possible,” the release further said.
Prime Minister Barrow said this morning that he has received an e-mail from Young proposing certain terms and conditions for the repurchase of shares, but the majority shareholder is indicating that whatever price the Government pays has to include the $36 million correction that the Public Utilities Commission made in BEL’s rate review back in 2008.
“That is something we could never accept,” Barrow told us.
In its 2008 Annual Report, BEL had said “…a $36.2 million charge for ‘excess revenues’ or disallowance of previously allowed costs was booked [by PUC]. This resulted in a net loss of $10.8 million for 2008, as compared to $29.9 million net earnings [profits] for 2007.”
The PUC had retorted in 2009 that BEL in 2008 had made a surplus of $38 million, and so “…the PUC is satisfied, and further assures the public, that BEL is not facing any financial crisis, as has been repeatedly claimed, and that there is no financial instability in the electricity sector as a result of the PUC’s 2008 Annual Review Proceedings Final Decision.”
Accompanying this article is a graph which charts BEL’s growing profits since the 1999 privatization. BEL’s profit in 2007 was nearly triple what it was when Government divested its majority ownership in 1999.
Fortis was a minority shareholder at the initial privatization in 1999, but its shareholding swelled to 70% in 2006, when the profits of BEL grew from $18.9 million to $26.1 million. Its profits almost hit $30 million in 2007.
However, in 2008, the company recorded a $10 million loss, blaming the loss on the regulator, PUC. Fortis’ lead representative on BEL’s board, Stan Marshall, had said that if BEL could not get a rate increase, the consequence would be rolling blackouts.
For 2010 it reported profits of $3.4 million—the second lowest for the company in over a decade.
Meanwhile, dividend payments have been frozen for approximately three years.
In its press release issued today, Fortis, BEL’s parent company, again casts the blame for BEL’s reported financial demise on the PUC.
“BEL has been in default of covenants under its long-term lending agreements since 2008 and has had no access to credit during this period,” it added.
Prime Minister Barrow, who disagrees that BEL’s financial woes are the fault of the PUC, said that BEL had previously made two proposals for the sale of the Fortis shares that he cannot accept: one is to allow an unlimited rate increase and the other is to increase its credit facility with Mexico, guaranteed by the Government of Belize, from $10 million to $20 million.
Barrow said that he would not flout the decision of the PUC to make the $36 million correction, upheld by the Supreme Court.
You can weigh in on this issue through our online poll by voting at www.amandala.com.bz. Look at the right hand side of our webpage for Amandala’s weekly poll box.
The question is: Should the Government of Belize find a way to take back control of BEL from Fortis Inc. of Canada, including a buy-back, if necessary? So far, 76.5% agree that the government should take back BEL.
The Belize Social Security Board, a statutory body, owns roughly 27% of BEL. At the time of privatization, 1,400 locals bought shares in BEL.