The Belize Electricity Limited (BEL) has confirmed that First Caribbean International Bank, one of its major creditors, has discontinued its credit, and Scotiabank is reportedly in the process of reviewing its credit arrangement with the electricity provider, according to BEL Corporate Communications Manager, Dawn Sampson.
Last Monday BEL reported via a press release that it is “experiencing severe financial difficulties and has had to require customers to pay the full cost of service installation upfront, with refunds to be provided, as other customers connect to the line extension.”
The Government of Belize has already had to provide a letter of credit for the company for its credit arrangement with Comision Federal de Electricidad in Mexico, from which BEL purchases a large percentage of the power it distributes locally.
According to BEL, “…one of the company’s main bankers recently declined to renew its credit facilities, citing concerns about BEL’s financial health. BEL is also in breach of several of its loan covenants and is prevented from raising capital and cannot finance its operations.”
It was confirmed this week that that bank in question is First Caribbean International Bank in Belize City.
While BEL has indicated that the recent rate decision of the Public Utilities Commission (PUC) has worsened its financial situation, PUC chairman John Avery, contends that the financial crisis—if there is one—is of BEL’s own making.
Avery listed the $43 million he said BEL paid to its sister company, Belize Electric Company Limited (BECOL), for a transmission line for the Mollejón hydro facility.
“The Commission told them they will not allow them to collect from customers for a second time. For 6 years now the Commission has been saying this. They still went ahead…there is no benefit to consumers,” Avery alleged.
He added: “They have been capitalizing a lot of recurrent expenditure, without the knowledge of the PUC, to defer collection, to increase profits over the long term, but it means they have to find money upfront to pay for it and collect later.”
Avery said that when the PUC undergoes the next Full Tariff Review with BEL, the Commission will implement a system where recurrent expenditures are not capitalized but collected upfront.
“BEL is also not telling us that they collected $8.4 million from July 1st to October 31st, more than they paid out for the cost of power,” Avery also said. “That is an interest-free credit they have right now that they will not have to reimburse until the first few months of next year. That is a big help to them for any cash flow situation they have now… and they are paying out dividends right now too. I don’t see how they are crying about cash flow.”
Finally, Avery commented that, “If they are crying that because of our decision they can’t pay their bills, of course, people will not give them credit…”
In outlining BEL’s position, Sampson told Amandala today that the banks really do have good reason to be concerned about the company’s financial situation. She said that BEL has repeatedly sounded the warning about their cash flow situation, which she described as “serious.”
She said that despite the current situation, she does not want people to panic. BEL is committed to keeping the lights on, Sampson assured.