June 16, 2011
Chief Executive Officer of Belize Electricity Limited Lynn Young says the company is not insolvent or bankrupt as stated publicly by the Prime Minister. Young was a guest on the Love FM Morning Show today and explained that the current financial difficulties that BEL is facing are seasonal and all the company is asking for is assistance to get through the low hydro production season.
Lynn Young - CEO, Belize Electricity Limited
ďI have explained that the company is going to get there under the situation we are in. And the problem we have right now is a serious cash problem, which happens every year and its going to get worse if we cannot get financing. Ernesto you said quite rightly right. Itís the difference between views of public service and the private but I donít think so, really I have come to the conclusion that this is a deliberate action by the government and the P.U.C. to basically force Fortis to try and sell them cheap because they want back the company and thatís why I came out and said ďListen letís resolve this or take back the company because itís hurting the company and itís going to hurt the country itís going to hurt the electricity supply. Youíve got to get this solved, one way or the other.Ē But is happening right now to B.E.L. is that the hydro contracts that we have, hydro is the cheapest power that we have, itís about 18-19 cents for kilowatt hour thatís compared a rate which is 44 cents for kilowatt hour. The power from Mexico, they charge us based on what they think we have to pay. That is my view of what is happening and thatís the business manís view and thatís how business people will do it. In the dry season when we donít have a lot of hydro, they will charge us based on what we would have to pay if we were generating with diesel, right now diesel is what $9.00 a gallon? You got about 12 kilowatt per gallon? It would cost us about 70 cents per kilowatt hour to generate with diesel. The Mexicans have jacked up their price, yesterday I was checking the price it was running 26 cents US per kilowatt hour. Thatís 52 cents Belize per kilowatt hour that is more than we charge customers but this is going to happen for two or three months until start to get a lot of rain and when the hydro opens up and we start generating a lot with hydro the Mexicans they start dropping their price, it happens every year.Ē
Young says he has explained the financial difficulties to the Prime Minister; but it appears that the cash flow difficulties have played right into the hands of those who have foretold the demise of Belizeís monopoly electricity provider. In effect, says Young, this was a demise foretold.
Lynn Young - CEO, Belize Electricity Limited
ďOur problem is that when the PUC made its decision in 2008 we got letters from the banks saying listen you are offside on your covenants, this is too risky, we cannot lend you any money until this is resolved. Just recently we asked Scotia to reconsider, we got back a letter from Scotia saying we cannot give you any money; we cannot give you any overdraft until this thing is resolved. It is not only the uncertainty; it is that shortly after elections the Minister of Public Utilities got on the radio and said he intends to bring BEL to its knees, the Chairman of the PUC every time he gets on the air he is saying he is going to wreck BEL, they keep on taking actions that is indicating to everybody that they intend to put the company down. If you are a financier and you know that this companyís bottom line depends on the actions of the PUC and the laws that the Government makes and the indications you are getting from these two bodies is that they intend to put this company under, would you lend money into a company like that? That is the problem that we are facing, we cannot get our overdraft, we had $6 million overdraft with Scotia, we had four with First Caribbean Bank, we have a million dollars overdraft with Belize Bank. Belize Bank didnít cancel their overdraft, Scotia has put their overdraft on hold, FCIB cancelled their overdraft. Because we are not meeting our bank covenants we cannot borrow any money without waivers from debentures holders, from Scotia Bank, from Royal Bank, from CDB because we are on default on all our covenants so when we have a problem now where our cash outflows are exceeding our cash inflows, even though it is temporary; Ernesto can call the bank and get some overdraft or get a temporary extension to his overdraft; we donít even have overdraft to meet it and we canít go and borrow.Ē
Young says that the red flags started to go up in November of 2008 and BEL has been actively seeking the assistance of government since then but all their call for help apparently fell on deaf ears. On Wednesday, the government of Belize issued a statement on its position regarding BEL reiterating that BEL is not viable as it is unable to pay its creditors, particularly its major supplier, Mexicoís Commission Federal de Electricidad. The GOB statement says that in order to avoid a major disruption of Belizeís electrical supply, government is prepared to acquire majority shareholding in the company. Governmentís position is that it is not prepare to interfere with existing utility regulation arrangements, that no further financial assistance beyond power-usage prepayments up to September would be given to BEL and that the announced acquisition would be on an amicable basis if possible so as to ensure an uninterrupted supply of electricity for the country.