THE WEEK IN REVIEW (1-5 FEBRUARY 2016)
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This day in Parliament
The Bahamas Parliament met on Wednesday, 3rd February to debate a compendium of food safety and security bills designed to protect the health and integrity of the local food chain from diseases and contamination.
Prime Minister and Minister of Finance the Rt. Hon. Perry G. Christie took the opportunity under the agenda item ‘Statements by Ministers’ to update the House on the status of specific tax exemptions contained in the Hawksbill Creek Agreement (HCA) due to expire on Thursday, 4th February. These exemptions were under review for the past six months.
The Prime Minister told the House that more time was needed and he delivered the first reading of a bill to extend the concessions for another three months. The new expiration date is now the 4th May 2016. The long title of the bill is the Hawksbill Creek Grand Bahama (Deep Water Harbour and Industrial Area) (Extension of Tax Exemption Period) Amendment Act 2015.
The specific tax concessions to port licensees under review included the following:
- No real property tax or real property levy.
- No personal property tax and no capital levies or taxes on capital gains or capital appreciation.
- No taxes of any kind on the earnings of the Port Authority or the earnings of its licensees.
Mr. Christie also advised the House of the recommendations submitted by the HCA Review Committee that the government will actively review over the next three months. The recommendations include extension of the expiring tax concessions for a period of 20 years in exchange for the following restructuring of the GBPA, inclusive of performance reviews every five years:
| Within one (1) year of extension, secure an international investor with the capacity to purchase majority ownership of GBPA; | |
| The Grand Bahama Development Company Ltd to submit a specific master development plan within six months of the extension; | |
| Appointment of Government representatives to the Board of Directors of the GBPA and PGL. Further, licensees to be able to elect a Director to the GBPA Board; | |
| An equity interest for the Government in GBPA and PGL companies equal to the value of the concession extensions, the value of any unmet obligations under prior extensions, as well as any obligations of the GBPA not met under the HCA; | |
| GBPA/PGL must establish and capitalize an independent investment promotion agency (IPA), with expertise in retaining, expanding and attracting businesses; | |
| To introduce a process which gives the right of appeal for GBPA’s licensing decisions; | |
| Reaching mutually agreeable terms with other investors relating to the exclusive rights of Freeport Harbour Company to container ports, cruise ports, etc. on Grand Bahama. | |
| Modernize the Grand Bahama International Airport and lower cost of airlift (e.g., under a public/private partnership arrangement); | |
| Investment in public infrastructure (e.g., hospital, sports centre upgrades, bridge/road upgrades, etc.); | |
| GBPA to publish its the balance sheets; | |
| Secure suitable partners to ensure the economic viability of Hutchison’s hotels, casino and tourism assets, and curtail unsustainable losses and large Government subsidies. The possible introduction of real property tax on undeveloped land. |
In the area of ownership and corporate governance on the island, the Committee recommended the following changes:
| Create a one-stop-shop to manage all GBPA and governmental approvals with a twenty-one (21) days fixed period to secure all central government approvals; | ||
| Move certain regulation currently overseen by GBPA to independent public bodies (e.g., energy regulation to a public regulator, environment to the Ministry responsible, airport fees and charges to the Ministries/Agencies responsible.); | ||
| Conduct one-time and on-going audits of Government deficit on GBI, performed by a mutually agreed public accounting firm. | ||
| Improve efficiency of labour and immigration matters by expediting work permits within twenty-one days, and, where earlier approvals are needed, within 48 hours; | ||
| Improve skills training and recruitment through the establishment of an ongoing multifaceted training programme suited to the skills needed in Grand Bahama; | ||
| Improve data collection on Gross Domestic Product (GDP) such that progress is able to be tracked; | ||
| Improve communications between Government and GBPA, licensees and public prior to any major policy changes; | ||
| To the extent that it has not done so, GBPA and Dev Co. to ensure that land transactions (historical and looking forward) are duly recorded at the Registrar General’s Department. | ||
“To bring long-term certainty and confidence among investors and the public” said Prime Minister Christie to the House, “the Government although not interested in management, must have a seat at the table of the GBPA, and put measures in place that would not allow internal shareholder fights. Those measures would also expedite decision making, create a dynamic, professional world class promotional entity and ensure an overall environment that keeps Grand Bahama on the cutting edge of competition and ensure compliance with world class best business practices.”
Deputy Prime Minister and Minister of Works and Urban Development the Hon. Philip Davis updated House on the status of the Management Services Agreement (MSA) between the Bahamas Power and Light and PowerSecure.
In doing so Mr. Davis pointed out that when compared to 2014, the fuel charge is dramatically reduced. “In fact” said Mr. Davis, “the fuel charge has fallen from 27.7 cents per kWh in October 2014 to 10.9 cents per kWh in December 2015. This is less than 40% the earlier rate. Sixty percent (60%) of our electricity bills was due to the cost of fuel” said Davis.
Making the case for the PowerSecure Management Service Agreement, DPM Davis informed House members that BEC’s “disparate system design” requires major capital investment of at least $450 million over the next 5 years to resolve the many issues faced by the corporation. “Additionally” said Davis, “BEC continues to incur $20-30 million in losses every year due to an archaic rate structure – a financial and operational situation that is impossible to sustain.”
He further noted that the proposed restructuring of BEC, commencement of operations of Bahamas Power and Light (BPL), BEC’s operating subsidiary, and dealing with the legacy liabilities, now present the opportunity for the government to “remove the current $240 million guarantee as part of the reform process, as well as reducing the strain on our foreign reserves.” The removal of this contingent liability will reduce the country’s national debt by some $240 million.
As for the new ownership and corporate structure, Mr. Davis said the new 100% government owned operating subsidiary, the Bahamas Power and Light Company, Limited (BPL), will operate under private sector management by PowerSecure, in a manner consistent with this Government’s National Energy Policy.
BPL was incorporated in September 2015 and its Board of Directors was appointed in the weeks that followed. The new Board comprises the following well-known business people:
- Mr. Nathaniel Beneby, Chairman
- Mrs. Donna Smith, Deputy Chairperson
- Mr. Deepak Bhatnagar, Executive Director
- Mrs. Patricia Hermanns, Director
- Mr. Andrew Rogers, Director; and
- Mrs. Daphne Simmons, Director
As for compensation, PowerSecure will be paid a base management fee of $2 million per year, adjusted for inflation annually. In addition, PowerSecure will have the opportunity to earn a performance compensation bonus of up to 150% of the base fee.
“Some $2.5 million of the performance bonus will be based on achievement of eleven target key performance indicators, including factors such as the management of non-fuel costs, fuel volume usage, efficiency and fuel volatility, reliability factors such as average number of outages and the duration of such outages, customer service metrics, financial strength of BPL, and others. The remaining $500,000 will only be earned if they surpass the targets” said the Deputy Prime Minister.
A press conference and signing ceremony for the Management Service Agreement (MSA) is scheduled for Monday, 8th February at the Office of the Prime Minister.