Prime Minister Dean Barrow told us today, Thursday, that Belize Electricity Limited (BEL), which he has described as “bankrupt,” had called government again today, asking for more money via prepayment of light bills, because it has no funds to make its payment due to Mexico next week.
BEL reported nearly $200 million in revenues in 2010; however, Prime Minister Dean Barrow announced at his quarterly press conference on Wednesday, June 8, 2011, that BEL is bankrupt—on the brink of becoming non-operational.
“Government will not allow a situation to occur in which the country is not guaranteed a stable supply of electricity,” said Barrow, indicating that Mexico, the main supplier of power to Belize, is threatening to cut Belize off.
“I promise that within the next 12 days, a solution will be found,” Barrow said.
That’s how many days’ worth of electricity BEL can buy from Mexico using $4 million in prepayment for two months of street lighting paid (in advance) by the government.
“This country, under this government, will not be plunged into darkness,” said Barrow.
A week ago, in speaking with Amandala on BEL’s cash flow problems, the chief executive officer and president of Belize Electricity Limited, Lynn Young, said: “Government needs to sit down and say ‘This is how we will make it work’, or else take back the company.”
Barrow said yesterday that Young, who is abroad until this Thursday, is scheduled to meet with him Friday morning, to discuss a possible solution to what Barrow indicated could become a national crisis. The Prime Minister said that he will report as quickly after Friday’s meeting as he can.
The Prime Minister said that he had gotten a report that Young was in Washington, along with Eamon Courtenay, SC, and he had confirmed via the airline that they flew together. He said he finds it “a little unsettling,” and he wonders what the purpose of their trip was. He said that he is a little troubled over the report.
Amandala contacted BEL to find out the reason for Mr. Young’s trip, but his executive secretary said she doesn’t have that information, but they could ask PR to get back to us with the information.
Barrow, who commented that BEL’s money problems are “principally of its own making,” said that his party has always been opposed to the privatization of essential resources, and he believes that the people of Belize should own the Belize Electricity Limited, the Belize Telemedia Limited and the Belize Water Services.
BEL’s privatization began in 1999. The Social Security Board retains 26.5% of BEL; the rest is primarily owned by Fortis Inc. of Canada.
The privatization of BWS in 2001 proved to be an utter failure as the former administration had to repurchase the company four years later, after the then Dutch investor, Cascal, accused the Musa administration of selling it “puss ena bag.” Government now owns over 80% of BWS, and SSB 10%. Minority shareholders own the remainder of shares.
The privatization of Belize Telecommunications Limited (now Belize Telemedia Limited) has also come with its own complexities. In August 2009, amid a dispute with the Michael Ashcroft group, the Barrow administration nationalized BTL, later offering shares to Belizeans. Government is still the majority owner of BTL, although negotiations are ongoing to sell a 45% block to a foreign investor. Meanwhile, Government still owes the former owners millions in compensation, but that matter will be litigated in court.
Fortis Inc of Canada, the majority shareholder of BEL, is also the owner of the Belize Electric Company Limited (BECOL), the second largest supplier to BEL next to Comisión Federal de Electricidad (CFE). BECOL provides substantial hydropower to the national grid.
Last week, Young told us that BEL owes BECOL over $12 million, owes CFE $8 million, and owes BELCOGEN (which generates power from bagasse), as well as suppliers.
“It’s just crazy,” he commented, adding that they get through by prioritizing what gets paid first.
Young is basically saying they will need a huge cash infusion to service their debts and pay for energy and they want the government to raise the ceiling of the letter of credit to CFE from $10 million to $20 million – but that will only buy 28 days of power, said Prime Minister Barrow. “Government cannot be so carefree with taxpayers’ money,” he added.
The Prime Minister said at his Wednesday press conference that, “The government is prepared to do whatever is necessary to ensure a stable electricity supply in this country.”
BEL has reported that it had paid out roughly $133 million of its $190 million in operating revenues just to purchase power. In 2008, the company reported a loss of $10.8 million, but it registered a profit of $8.9 million in 2009 and $3.4 million for 2010.
Cash and short-term assets were listed at only $5.3 million for 2010 versus $25 million the year before, 2009.
Earnings per share for shareholders were down from 13 cents to 5 cents over the course of 2009-2010.
In its annual report for 2010, BEL said “the Government of Belize increased the business tax rate on the revenues of the Company from 1.75 per cent to 6.5 per cent, a 271 per cent increase.
“This increase resulted in $5.8 million in extra business tax expense for the period April to December 2010, which is being deferred to be recovered from customers when the tariff components are adjusted in accordance with the tariff setting byelaws.”
It said that without this deferral, BEL would have ended the year with a net loss.
Amandala received an e-mail from BEL today indicating that contrary to our report that BEL “won’t pay” the extra taxes, the company has paid the full 6.5% to Government.
BEL said that the actual tax paid was reflected in its cash flow statement as $8 million.