Governor-General Sir Colville Young this evening signed into law an amendment to the Electricity Act which permits the Government of Belize to immediately take majority control of the Belize Electricity Limited (BEL), the power company which supplies over 70,000 customers nationally, from Fortis Inc. of Canada.
The move by the ruling United Democratic Party reverses the privatization process of the power provider, which began under the current Opposition, People’s United Party, when it was in office back in 1999.
In speaking of the nationalization today, Prime Minister Dean Barrow, at a Special Sitting of the House of Representatives called to pass the acquisition law, described the government acquisition of BEL as “a case of necessity.”
BEL, Barrow had said, has no money to pay its suppliers and it runs the risk of having its license cancelled by the regulator, the Public Utilities Commission (PUC). He also said that BEL had written Government in May, when it sought US$3 million in prepayment for electricity bills, indicating that on the weekend of May 27, the country could be faced with rolling blackouts.
Government had a choice with the Belize Telemedia Limited acquisition, which it carried out back in August 2009; but in this matter, it doesn’t have a choice, as “there will be blackouts because BEL can’t pay,” Barrow said today.
He told the press, after the Sitting of the House, that if the acquisition orders can be signed tomorrow afternoon, as soon as the orders are signed Government will assume full control of BEL.
BEL has earned in excess of $150 million in profits since Fortis first purchased shares in 1999, but Prime Minister Dean Barrow today described BEL as “de facto insolvent.” He said that the government will give BEL no more financial bailouts with Fortis at the helm. BEL’s financial fiasco has resulted in the looming threat of collapse that could see Belize chopped off from its main supplier, Mexico, and plunged into darkness, Barrow has indicated.
As we go to press tonight, there are reports that BEL’s executive management have vacated their seats even before the government takeover.
Whereas there have been reports that Lynn Young, President and Chief Executive Officer; Rene Blanco, Vice President, Finance, and Chief Financial Officer; Curtis Eck, Vice President Customer Care & Operations; and Juliet Estell, Company Secretary, have all resigned, Amandala has been informed that the management team had been terminated last Friday.
“It hardly matters whether the executive management stays or goes...,” Prime Minister Barrow told the press.
One board member we spoke with this afternoon told us that BEL’s former CEO, Lynn Young, had said he would have resigned on Friday, but he had not been told anything about the termination or resignation of senior management.
Joseph Sukhnandan, Vice President, Engineering & Energy Supply, and employee at BEL for the past 25 years, told our newspaper Monday, however, that he has been terminated and paid his pension and severance as per company policy. He told us that no reason has been cited for his termination.
Amandala was unable to reach Lynn Young when we tried calling him today. Jeffrey Locke, who has served as director of the Belize Citrus Growers Investment Company Limited, the Citrus Products of Belize Limited, and member of the Banks and Financial Institutions Appeals Board, is to be installed as BEL’s interim CEO to replace Lynn Young, although Prime Minister Dean Barrow told the media today, “I don’t ...want to confirm anything at the moment,” as the official papers had not been signed.
Barrow’s law partner, Rodwell Williams, SC, who has been chairman of BEL since the Barrow administration came to office in 2008, is, according Prime Minister Barrow, standing by with the prospective interim Chief Executive Officer.
He said that Williams and Deputy Prime Minister Gaspar Vega, along with the new interim Chief Executive Officer, would immediately effect the takeover, but also assured staff that nobody is being forced out.
BEL employs roughly 300 workers. President of the National Trade Union Congress of Belize, Dylan Reneau, who is an SSB director on BEL’s board, told Amandala that PM Barrow had met with union officials Friday and gave his word that there will be no termination of BEL staff. He said that the unions have a meeting slated with Lynn Young on Wednesday, after which the NTUCB would release a formal statement.
Government assumes control of BEL with a mountain of bills and very little funds to pay them—in excess of $27 million to its power suppliers, according to recent reports from both Government and BEL.
Barrow said Government has to make it work, as “the country will be faced with imminent blackouts again...” He said Government would borrow what it has to borrow, in order to make it work.
The Prime Minister said again today that BEL owes $5.1 million to BELCOGEN, owned by the Belize Sugar Industries (BSI), and he noted that the failure of BEL to pay BELCOGEN could put BELCOGEN in the position of having to default on its debt, which would trigger a call on its debt and the debt of its parent company BSI, jeopardizing the livelihoods of 6,000 cane farmers in the north.
Barrow told us that a first priority would have to be to ensure BELCOGEN gets paid, so it can take care of its debt.
BEL also owes its chief power supplier (the state owned Comisión Federal de Electricidad (CFE) in Mexico) nearly $10 million for power.
Prime Minister Barrow said that he is traveling to Mexico tomorrow to meet with President Felipe Calderon, since BEL is “right at margins of exhausting” the $10 million letter of credit that the Government had backed for the company. Barrow said that if Mexico increases that figure to $20 million, this would buy some time for BEL.
Barrow said that the Mexicans were a little bit reluctant to help BEL with further credit, because such a move would have been on behalf of a BEL owned by a Canadian multinational, but now, he “expects, hopes and believes” that Belize will get better terms from the Mexicans, including an extension of the credit line.
Additionally, he said that there will need to be an infusion of capital into BEL, “and we are prepared to go to the bank...”
“No doubt Government will have to find money to put into the company,” he said, indicating that either BEL will borrow more capital with a government guarantee or Government will borrow to on-lend to BEL.
Such proposals were floated by the Fortis-controlled BEL, asking Government to help the company to get financing so that they could pay their suppliers. Barrow indicated, however, that the government would not put further taxpayer dollars at risk with Fortis still in control of the company. He said the company ought to, and can be profitable.
The new management and board will have to get some independent auditors to look at things, and it is critical that they do that early, said Barrow.
As for pending litigation that BEL had launched against the Public Utilities Commission (PUC), Barrow said that a BEL now controlled by Government would withdraw the injunction that prevents the PUC from looking at rate increases. He added, however, that the PUC is not convinced BEL needs a rate increase.
Whereas the BTL matter has gone to the Supreme Court to settle the question of compensation, which could amount to hundreds of millions of dollars, Barrow said that BEL, because of its state of financial demise and the extent of its debts, could not attract nearly as much compensation as some have been indicating in the public domain. Compensation is based on market value, not book value, said Barrow, adding that BEL is now “pretty much in collapse.”
Prime Minister Barrow said that Government would divest some of the Fortis shares, but would not return control of the company to foreign hands.
The Social Security Board owns roughly 26% and Barrow said, “SSB might want to put some more money there.” He said he has “no problem even if Social Security wants to be a majority shareholder.”
The House of Representatives concluded its meeting today during the lunch hour, and the Senate met in advance of its 3:00 p.m. scheduled time in order to ensure that the Governor-General could have the bill signed into law before the end of the workday, today.
During today’s Senate meeting, private sector Senator Godwin Hulse said of the acquisition: “This sends a very dangerous and frightening signal.”
He indicated that the Belize Chamber of Commerce and Industry and the Belize Business Bureau, the two private sector organizations, undertook a poll which indicated that 68% of people polled said “No” to Government’s acquisition of BEL.
Hulse said that the concern is the way the takeover is being done: by acquisition rather than negotiation.
Senator Henry Gordon, representing the churches in Parliament, said: “This is a done deal and we understand that.” He did indicate, however, that public sentiment with respect to the BEL takeover bill is positive.
Senator Gordon underscored, though, that the costs of the acquisition are numerous, as the shares will have to be paid for. He also pointed to BEL’s accumulated debt as a concern.
Additionally, Gordon addressed public expectations that the cost of power should go down, now that the government would be in charge of BEL. Whereas today’s move might signal to some people that we can now expect a reduction in rates, the suggestion should not be entertained because of BEL’s financial status, he said. Government now has the responsibility to ensure that BEL operates in a profitable manner, he added.
Ruling United Democratic Party Senator Frank Mena said that with companies such as BEL, profits are privatized, but losses enter the public domain. This takeover, said Mena, is a case of Government asserting its sovereignty, because many times Belizeans “get chanced”.
Whereas the churches and the private sector had their say on the matter, the unions did not get a chance to weigh in, since Paul Perriott, who had been appointed Senator on their behalf, is reportedly not in the country.
For its part, the People’s United Party boycotted today’s sittings of Parliament, claiming that it got late notice of the meetings.
“The Opposition condemns the practice by the current Government of calling meetings of the National Assembly and then presenting major pieces of legislation to the Opposition when they arrive at the House of Representatives,” said the PUP.
We note that the acquisition of BEL was not listed on the agenda, and was only made public this morning through the addition of a supplementary to the agenda.
Tomorrow, a new chapter begins in the life of BEL. Amandala has learned that BEL’s board of directors is due to convene an emergency meeting at 11:00 Tuesday morning.