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GOB says it will buy back BWS and sell back to Belizeans

GeneralGOB says it will buy back BWS and sell back to Belizeans


In March, 2001, the Government announced that it had sold 82.68% of BWS to CASCAL for US$28.6 million (BZ$57.2 million). A group of 1,400 Belizeans were sold another 7% block and 4 million shares (or 10% of BWS) were sold to the Social Security Board.


The share purchase agreement for the repurchase of BWS ?will also bring to an end the current dispute between the parties,? Government claims.


The dispute is over BWS?s request for a 32% rate hike in 2003?a request that the Public Utilities Commission (PUC) denied. Instead, the PUC granted BWS a 17% rate increase.


In the same statutory instrument that GOB had set the guidelines and procedures for periodic rate reviews, GOB legislated a yearly 12% regulated rate of return for BWS shareholders for the 25-year life of the company?s license. A guaranteed return?which was in line with GOB?s promise to CASCAL for a guaranteed profit on its investment?means that if shareholders did not get a 12% return through water sales, GOB would make up the difference with taxpayer dollars.


In 2001, seven months after the privatization of BWS under Hon. Max Samuels, CASCAL had threatened to lay off workers or seek a rate increase, complaining that GOB had given it a rotten deal when it sold them the company that March.


The then Minister of Public Utilities, Hon. Ralph Fonseca, who was recently reassigned the portfolio, had told our newspaper that CASCAL was to invest $140 million in BWS and no dividends or profits were to be expected for 5 years.


Upfront, though, CASCAL was permitted to collect $1 million in management fees, and expatriates who were running BWS for CASCAL had incurred costs of $1.5 million a year, according to the report of independent expert, NERA, prepared for the PUC in 2004.


Water rates have been on the upward trend over the past two years. On April 1, 2004, the PUC approved a 17% tariff increase for BWS. This year, it approved a $3 million revenue increase for BWS. In March, 2005, the BWS submitted another application, asking for a 2.1% increase to offset the hikes in GOB?s new taxes, as well as a 2.7% increase for inflation. The PUC approved 2.5% for inflation effective May 1, 2005. Dissatisfied with revenues from water rates, the CASCAL-owned BWS had sought arbitration against the Government of Belize, by invoking a clause for binding arbitration outside Belize?s territory. Pending the closure of the sale in October, the arbitration has reportedly been placed on hold. We understand that the deal is that the arbitration would be dropped altogether once the share purchase agreement is concluded.


?It is the Government?s intention to offer the majority of these shares to the Belizean public. A prospectus for this purpose will be issued following the completion date,? said the GOB release.


Similarly, GOB had announced, when it had reacquired majority control of the Belize Telecommunications Limited (BTL) this February, that it would make the shares available to Belizeans, but most of those shares have been pledged to ECOM, a company controlled by a highly influential Englishman with Belizean nationality, Michael Ashcroft.


Amandala had first reported GOB?s plan to buy back BWS in the article, ?Senate divided over telecom amendments,? published on page 8 of the August 10, 2005, issue of Amandala. This was reported in the context of amendments made to the Public Utilities Commission Act, giving the Minister of Public Utilities, Hon. Ralph Fonseca, more power in the public utilities sector.


In February 2004, GOB bought out Carlisle Holding?s 57% interest in another utility company, the Belize Telecommunications Limited, for US$57 million; credited them to American Jeffrey Prosser; reacquired them a year later, and then sold 15% back to a Carlisle company at a discount. GOB plans to sell the remaining 37.5% shareholding in BTL, making another 12.5% available to ECOM. In the sale of BTL, GOB sold just over 30% of public sector shares, including Social Security shares and the ?special share,? to Prosser.


Currently, GOB holds the ?designated share? or ?special share? in BWS, which permits GOB to appoint 2 directors on BWS?s board. Ordinary shareholders appoint a shareholder for each 10% shareholding in BWS and so GOB holds another seat by virtue of its shareholding through the SSB. CASCAL controls 8 seats for its 80-odd percent shareholding, but GOB has retained chairmanship of BWS.


Unlike the case with BTL, GOB has not sold the special share in BWS?at least not yet!


BWS has so far not commented on the buy back.

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