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For its Series 1 Debentures and General Operations

On December 31, 2012, Belize Electricity Limited's (BEL) Series 1 Debentures will mature. Immediately following the change of ownership of BEL in June 2011, the Company prepared its 2012 - 2016 Business Plan. Below is an excerpt from the Business Plan.

"Pursuing suitable financing options will be important in order to meet our short-term financial commitments relating to the maturing debentures in 2012, as well as to meet our medium to long-term operational objectives. The Company will be reviewing loan covenants and requesting revisions to reflect a more reasonable Return on Investment, so as not to burden consumers. Once achieved, BEL will then be positioned to obtain financing for its long-term investments. Considering high liquidity in the market, financing should not be difficult to obtain once the loan covenant issues and the Company's profitability are adequately addressed...

As a first option, we will be approaching the Social Security Board to purchase preference shares in the Company... The order of preference [of the funding options under consideration] is in line with risk associated with achieving the lowest rate possible."

Following confirmation from the Caribbean Development Bank (CDB) that BEL's borrowing capacity is not restricted by any of its loan covenants with the CDB, the Company has therefore proceeded with its financing plans and has made an offer to Social Security Board (SSB) to purchase preference shares and debentures in the Company. The debenture offering will also be made public later in October. The Company is seeking to lower its cost of capital, while offering an attractive investment opportunity. BEL's interest rate cost for the Series 1 Debentures is 12 per cent. The Series 5 Debentures are being offered at an interest rate of 7 per cent, which remains highly competitive considering market conditions.

As stated in the Company's Business Plan, these financing initiatives are also in support of the Company's operations. A current challenge facing the Company is high cost of power, which started in July 2012, and has put a strain on the Company's cash flow since September 2012. Uncharacteristically low rainfall levels this time of the year have resulted in considerably lower hydroelectric production. This, coupled with production problems at Belize Cogeneration Energy Limited (Belcogen) and Hydro Maya Limited, has forced BEL to purchase more power from Mexico, at an average cost of 42.9 cents per kilowatt hour (kWh) compared to the Public Utilities Commission's (PUC) regulated cost of 26.2 cents per kWh. These are normal operating risks associated with running an electric utility in a fixed price regime, where electricity price adjustments are expected to be made only at Annual Tariff Review Proceedings (ARP). Therefore it is prudent for BEL to secure access to funding, whether from shareholders and/or lending institutions, in order to be able to absorb spikes in electricity cost until the next ARP. In addition to the preference share and debenture offering options, BEL has also been able to secure short-term overdraft facilities with the commercial banks at lower interest rates than before.

With respect to utilizing the Company's assets, (such as its Corporate Headquarters) as security, this is a standard part of doing business. BEL's Corporate Headquarters and Magazine Road properties have been used as security for various loans since 2003.

The Series 5 Debenture Offer will be opened later in October 2012 and will close in December 2012. This offering has already been gaining much interest from financial institutions and investors. In fact, the Company has consequently decided to increase the offering from BZ$17 million to $25 million in order to accommodate more investors. For more information, interested persons may contact the Company at 227-0954 or email [email protected].

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SSB Says 15M in BEL is "A Golden Opportunity"

Last night we told you about the 15 million dollars investment that the Social Security Board plans to make in BEL.

On Monday, by a majority vote, the board approved an investment of 5 million dollars in BEL debentures at 7% and 10 million dollars in preference shares at 5%.

The investment has the appearance of unseemly haste in a power company that is facing prohibitive power purchase costs. In other words, the 9investment seems like a bailout, for a cash strapped company.

And while that's what critics or outsiders may conclude, today the Chairmen of The Social Security Board of Directors and its investment committee held a press conference to say that it is a sound investment - more than that, it is a golden opportunity! Here's how they explained it:

Doug Singh - Chairman, Social Security Board of Director
"BEL is offering 5 million shares of preferred shares. It's a class of hears that has a guaranteed return of 5%, and it is for a life of 3 years, after which time, BEL will re-purchase those debentures. So, to a great extent, it is a debt instrument. BEL is offering as security for those preferred shares, real estate that it currently holds. It is not unusual for BEL to use its assets as security; in fact, it has used the very assets that it is currently pledging as security for some of the instruments that it's offering, it has used such in the past."

Nestor Vasquez - Chairman, Investment Committee, SSB
"This will be a solid investment, a golden opportunity for the Social Security Board, where we will move - we have money that is earning 1 �% and 2%. We have about 26 million dollars of that money; it's easy for us to take 15 million dollars, and get 7% on the debentures, and get 5% on the preferred shares. I mean, that's a golden opportunity, and knowing that BEL is a strong company, it's a monopoly; it cannot fail."

Doug Singh
"In 2012, BEL projecting a profit in excess of 8 million dollars on the prospectus, the most revised prospectus that we've received. That gives us the level of confidence that the kind of returns, and the path and direction of BEL is certainly in a positive path, and it is heading back to the direction of the form of management that BEL had in the past. The Board of Social Security is responsible to get the best possible returns on its investments, so that it can protect the funds. The offer on the table from BEL givs the Social Security Board much better yield, and is attractive, so the Social Security has expressed an interest in participating more in the debt instruments that are being offered by BEL."

Jules Vasquez
"Were you all required to fast-track consideration on this investment?"

Doug Singh
"Not at all, in fact, because of the liquidity in the banking system, BEL has no shortage of banks out there offering to finance them. The question is at what rate. BEL has made the decision, and BEL's Board has made the decision that it will seek financing at the best possible rate. That is why it has sought out institutional investors to try to get the possible rate. Does BEL need the money in short order? I imagine that any institution that uses cash at that rate, always has an immediate need for the cash. Can BEL get by without the cash from Social Security Board, or any other institution, within the very short term period and still function? Absolutely, because the commercial banks are there."

Jules Vasquez
"Now, reading from the inter-office memo, it says that due to time constraints, the valuation of both properties cannot be conducted. What, sir, where those time constraints to have them moving in a rush?"

Dough Singh
"There is not another Social Security Board meeting for several weeks, and Social Security Board determined that in the interest of trying to get the best possible return, to review the proposal in the shortest possible period. It may have inhibited the ability for us to do an independent valuation. Notwithstanding that though, whether or not there were securities for the preferred shares, Social Security would have still invested. In addition to that, BEL had those securities as collateral for their working capital financing needs. All they are saying is that if that, 'if you would supply our working capital financing needs, we are prepared to give you, in addition to the instrument that we're selling to you, we're prepared to take the same security that we've given to the institutions who currently have our working capital financing, to you.' And of course, we're going to say yes."

The press conference was held at the BTL Boardroom where Vasquez is the Executive Chairman and Singh is a Director.

So, with the Social Security Board having approved the investment, it now ahs to be published for two weeks in the gazette - and the money can then be disbursed to BEL after that.

And how did the vote go at the Social Security Board of Directors where there is ample representation from the unions and the business sector? Singh said that one business rep abstained, the other supported it, but asked for more time to consult, as did one labour rep who was present for the vote - making it, in Singh's words - almost unanimous support.

It is worth noting that Social Security owns 27% of BEL.

BEL issued a statement this evening stating that it is being challenged by the high cost of power. The high cost of fuel has been worsened by uncharacteristically low rainfall levels leading to low hydroelectric production.

These factors are coupled with production problems at Belcogen and Hydro Maya Limited, which has forced BEL to buy very expensive additional power from Mexico. How expensive? Try 42.9 cents per kilowatt hour. Compare that to the PUC's regulated cost of 26.2 cents per kilowatt.

BEL adds that it offers its properties including its Corporate Headquarters as security, as security for various loans since 2003.

Channel 7

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Marty Offline OP
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Fortis moves to block $15 mil SSB investment in BEL

"�a golden opportunity," says SSB

The Belize Electricity Limited (BEL) is facing stern opposition from Fortis Energy International (Belize) Inc., subsidiary of Fortis Inc. of Canada, in its latest attempt to raise an urgent $15 million in financing from the Belize Social Security Board (SSB), which has agreed to invest $10 million in preference shares redeemable in three years at a rate of 5% and $5 million in debentures which would earn 7% annually-much better than what SSB said the earmarked funds are now earning in the commercial banks.

Last Thursday, two days before SSB's investment committee voted on the proposal, Fortis, represented by Eamon Courtenay, SC, had already filed a motion in the Court of Appeal seeking to block BEL's attempt to raise any new debt and issue any new shares.

As a part of its case to challenge the June 2011 nationalization of the BEL, filed against the Government of Belize, Fortis is now seeking an injunction from the Court of Appeal to stop BEL from acquiring the new debentures and issuing the preference shares. The case is slated for hearing sometime next week.

Meanwhile, BEL still hopes to proceed with the debenture offering: "We want to release the prospectus and begin the offering before the end of the month," Rodwell Williams, chairman of BEL, told Amandala today.

BEL has said that it will up the $17 million offered in Series 1 to $25 million in the new Series 5 issue. Due to a general decline in interest rates on the deposits, the debentures will pay 7%, down from the 12% offered in the first issue.

"A current challenge facing the company is high cost of power, which started in July 2012, and has put a strain on the company's cash flow since September 2012," said BEL in a press release issued on Wednesday, October 10, 2012.

BEL added that "�it is prudent for BEL to secure access to funding, whether from shareholders and/or lending institutions, in order to be able to absorb spikes in electricity cost until the next ARP [Annual Review Proceedings by the Public Utilities Commission]."

According to Williams, BEL is currently getting "opportunity" power from Mexico, which costs 42 cents per kwh, while customers are being charged 26 cents based on the regulated cost of power. BEL has had to absorb the difference.

Every in-country source of power is not performing, Williams told Amandala. He said that Hydro Maya, a small plant in southern Belize, is out of commission; BECOL, which gives a rate as low as 5 cents per kwh, does not have enough water to produce power and has been underperforming since June; and BELCOGEN (the bagasse plant operated by the Belize Sugar Industries) has mountains of bagasse that it says are no good to fire their plant and new bagasse won't be available until the next crop comes in this November. This leaves only the very expensive gas turbine owned by BEL. Due to these irregularities, said Williams, BEL has had to purchase more Mexican power - which has come at a higher cost.

BECOL's operations manager, Wayne Cadle, confirmed to our newspaper that they are currently under-producing hydroelectricity-although it is far less than usual due to low water levels. Whereas they would produce up to 56 MW of hydropower at this time of the year, they are now down to 30 MW. BECOL operates three hydropower plants on the Macal, said Cadle.

Williams told us that over $30 million in credits earned by consumers and rebated by the PUC are being wiped out by the current power supply crisis, but saving on financing can help offset costs to consumers. The situation is also wiping out BEL's liquidity, said Williams.

As nationalists running the company, he said, they have to get the best rate.

He explained that the cost of financing is also passed through to customers on their light bills, and the less they pay for financing, the less the cost to consumers. He also said that reducing BEL's debt service obligations would enhance the value of shares held by investors - which include the Government of Belize, the SSB and 1,500 minority shareholders.

All the banks have expressed their willingness to take up debentures from BEL, said Williams.

According to chairman of the SSB's investment committee, Net Vasquez, the decision made by the SSB on Saturday, to invest $15 million in BEL, is based entirely on the fact that it is "a golden opportunity." "We have about $150 million available. We have $26 million of that $150 million that is only earning between 1.25% and 2%. Therefore, if we lend [it to BEL] for 7% � that is a big gain that we get," Vasquez told Amandala.

"We can no longer get 7% from the banks," added Vasquez, estimating that the new debenture series would run about 12 years.

According to Singh, SSB's chairman, the CDs or term deposits that are earning around 7% at the banks won't be renewed at the same rate. He said that banks have already indicated that the interest rate would be slashed to about 3.75% and no new cash would be taken for term deposits, he said.

"BEL has shown a very good history in paying its debt," said Singh, adding that BEL is taking advantage of the opportunity presented and seeking to refinance and cut interest rates, which will cause interest payments to drop from $13 mil in 2011 to under $5 million in 2012. He said that the company is also projecting a 500% increase in net profit for the current financial year.

All this, said Singh, benefits SSB, which owns almost 27% of BEL. BEL would gain either by receiving cash dividends or equity appreciation, said Singh, calling it "a win-win situation."

Amandala asked Singh how the vote went when the board of directors of the SSB met on Monday. He told us that he and the four government directors voted in favor of the investment in BEL; however, the two private sector directors and the one union director present abstained, mostly indicating that whereas they personally thought the BEL offer to be good, they had not consulted with their memberships on how to vote.

According to Singh, BEL and SSB had been discussing the proposal for months, but no concrete details were available until late last week, when the prospectus and the internal analysis and recommendations of the SSB were available.

No one voted against the proposed investment in BEL, Singh indicated.

BEL is also offering the $10 mil worth of SSB preference shares at a rate of 5% yearly. SSB currently owns 26.9% of BEL.

"Both of those rates are far better than where we are," said Vasquez.

He told us that about 15 years ago, in the late 90s, SSB had invested in the debentures due to mature this December, and it also intends to reinvest those funds in the Series 5 debentures.

"What else is available?" Vasquez questioned.

He noted that back in October 2010, the SSB made a decision to invest $50 million in BTL shares. Vasquez said that that the BTL shares are to date the best performing SSB investment, yielding returns as high as 12%.

He told us that "�$25 million of that $50 million was only earning 1% at the Central Bank."

Apart from the financial motivation for investing in BEL, Vasquez also pointed out that, "BEL has to survive and continue to give services [to the nation]." He said that by virtue of existing constitutional provisions, Government will always be in control of the company and the "good investment" SSB is making in BEL would continue to perform.

He confirmed that the board of directors of SSB voted in favor of the investment when they met on Monday at a regularly scheduled meeting.

"What we have announced is that the procedure requires the Social Security Board to 'gazette' the proposal twice and to publish it in a newspaper," Vasquez explained. He said that the funds won't be disbursed until two weeks from now, when that process is complete.

BEL has indicated that the financing proposals outlined in its 2012-2016 business plan said, "As a first option, we will be approaching the Social Security Board to purchase preference shares in the company� The order of preference [of the funding options under consideration] is in line with risk associated with achieving the lowest rate possible."

"The Series 5 debenture offer will be opened later in October 2012 and will close in December 2012," said a statement from BEL.

According to Williams, the SSB's investment in preference shares will be secured with assets, which will include the Magazine Road substation and possibly the Northern Highway headquarters.

BEL has issued four prior debenture series, cumulatively valued at just under $70 million. The Series 1 debentures valued at $17 million (12,391 unsecured debentures at $76 and $160,065 unsecured debentures valued at $100) matures at the end of the year, on December 31, 2012.

In its 2011 annual report, BEL had indicated that it would seek to refinance the Series 1 debenture.

"With high market liquidity," said BEL, "we are confident that we will be able to secure financing at lower interest rates."

Williams said that BEL has never missed a payment on its debentures. He said that because of the current situation, BEL needs to re-profile its debt and it will do so by floating debentures to capitalize on the opportunity that the market now gives them to refinance.

When the SSB reversed its decision last June, around the time of the BEL acquisition, to lend $14.9 million to the Mena family's Nature Catch shrimp facility, Prime Minister Dean Barrow had signaled to the media that an investment could, instead, be made in BEL.

At the time SSB's investment committee recommended the loan to the Menas, it had likewise complained of low returns on its cash deposits at the commercial banks. However, public outcry led to the SSB's abandonment of that offer.

As for public feedback on this new proposal, Vasquez said that the calls he has received in response to the announcement that SSB plans to invest $15 million in BEL have been "quite favorable." One of the questions raised at yesterday's press conference, said Vasquez, is why BEL seems to be in a hurry to raise the debentures.

"As far as I am concerned, it is a golden opportunity," Vasquez reiterated


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Fortis Tries To Block SSB Investment in BEL

Last week, we told you about Social Security's plans to invest 15 million dollars in BEL debentures and preference shares.

Well, the former owners of the power company, Fortis, filed an application at the Court of Appeal for injunction to restrain the current board of BEL from issuing these shares, and today, that application was heard.

The matter was heard today in another highly technical hearing.

After, we spoke to the attorneys for both sides about the points they made in the application.

Here's what they had to say:

Eamon Courtenay - Attorney for Fortis
"There are purporting to issue preference shares to the Social Security Board to finance operations of the company. We've ask the court to intervene and to stop them from doing that because if FORTIS wins the case and gets back the company we would then have a set of shareholders who are preferential treated as compared to the ordinary shareholders like FORTIS and the court heard our arguments and have adjourned to give us a decision."

"I was very clear to the court that my clients are not attempting to stop the company from raising money to finance its operations. I made that clear on more than one operation. In fact I indicated to the court that we would not oppose very strongly the issue of the debentures which they have indicated that they are going to issue and as I understand it Social Security is going to take up."

"FORTIS readily accepts and re-stated for the record that Belize Electricity Limited must be able to finance its operations, must continue to provide power for the country and it is not the intention of FORTIS at all to interfere with that. What we are saying however is that preference shares is not the only way to raise debt and you can do it in another way. Preference shares have a lasting effect on the company or at least until they are redeemed if they are redeemable and we are asking the court for the next few months to issue an order that those types of shares not the issued."

Denys Barrow - Attorney for GOB
"The question really whether preference shares would be a good or a bad thing for the company and there's simply a resistance to it by the former owners but it is a resistance which is not based on anything except a dislike for the idea and I guess because they are not the ones doing it."

"The application that FORTIS made was extremely wide ranging when it was filed and now it has come down to a single thing. FORTIS has even back off asking the court to prevent the issue of debentures - they have accepted in essence that the debentures are properly to issue, so all they are arguing about now is that if preference shares are issued then the ordinary regular shares would diminished in value and my argument to the court - the argument of BEL, board and the government is that that might actually enhance the value of the present shares because it would more greatly capitalize the company and make it a more valuable company. You are putting money into the company."

Eamon Courtenay - Attorney for Fortis
"What we have here is a scenario where the board that is in charge on Belize Electricity Limited in our respectful view is there unlawfully. The court has not yet pronounced on that but that is our position."

"FORTIS is not intending to damage Belize Electricity Limited. That is not the intention of the client at all. The intention of the client is to as best as possible to minimize any lasting effect that it may had on it in the event that we succeed in the case. So, it is for temporary relief that we seek."

And while that application was the main issue at the Court of Appeal, the British Caribbean Bank and Dean Boyce and the Employees Trust also had applications for injunctions against the GOB-controlled Board at Belize Telemedia Limited to restrain them from issuing dividends until the company's ownership is determined by the court.

Viewers may remember that the Caribbean Court of Justice already issued an order blocking the board from issuing any dividends until December 15.

But BCB and Dean Boyce are taking no chances and they want to pre-empt any attempt to issue shares on or after December 15, if in fact the ownership has still not been determined at that time.

Admitting exhaustion, The Court of Appeal decided today that they will hear this application after the October sitting, but Government attorney Denys Barrow also made an application to get Dean Boyce cross-examined in open court.

We asked Barrow why he made that application, and he told us that Boyce gave written evidence in which he commented on the country's financial situation, which could affect the outcome of the trial.

Here's why he wants Boyce to back up those claims:

Denys Barrow - Attorney for GOB
"The applications by the three appellants - each application is for an injunction and the basis of it is that if they win and an award of damages is granted against the government of Belize - the government of Belize would not be able to pay the damages and this is because the government they say has defaulted on paying its external debts and they say this means that the government's finances are in dire straits. We file an affidavit from the financial secretary Mr. Joseph Waight indicating that government is fully able to pay its debts, to pay any damages which are awarded and that the debt re-structuring would be completed by the end of the year."

"Mr. Boyce had filed a responding affidavit seeking to contradict what Mr. Joseph Waight the financial secretary has stated and he is seeking to put to this court his view as authoritative as to what is the state of governments' finances. I want Mr. Boyce to come to this court and justify the statements that he makes and to establish himself as a greater authority of speaking more informedly than the financial secretary. Let Mr. Boyce come."

The Court of Appeal will hear that application next week on whether or not they will allow Dean Boyce to be cross-examined. The decision on the BEL injunction application will be handed down at a later date.

Channel 7

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Fortis Injunction Request Refused

There is breaking news this evening from the Court of Appeal. This evening after 5:00, the court handed down a judgment refusing the Fortis request for an injunction on the sale of BEL's preference shares.

As we had reported on Wednesday, the former owners of BEL, filed an application at the Court of Appeal for an injunction to restrain the company from issuing these shares.

Epic arguments were advanced - but they were resisted, and the injunction refused.

The effect of this is that BEL can now sell 10 million dollars worth of preference shares at 5% to Social Security. The Social Security Board of Directors has approved the investment and after it is advertised for two weeks in the newspapers, disbursement of the investment can proceed.

Channel 7

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BEL Presentation to BCCI - Series 5 Debenture Offering

The BCCI Executive Board met on Friday, October 19th with the CEO of Belize Electricity Ltd and his team for a presentation on the proposed investment by SSB in BEL. Please go to the following link to view the presentation.

Please be reminded to provide us with your comments on the following Notice, so that we can make adequate representation that is consistent with your overall sentiments. Please send comments to [email protected] by 8:00 a.m., tomorrow, Tuesday, October 23rd, 2012.

Investment Opportunity - BEL Opens $25 million Series 5 Debenture Offer

Belize Electricity Limited (BEL) has opened its $25 million Series 5 Debenture Offer, which will earn a highly competitive interest rate of 7 per cent for twelve years, through to 2024.

The cost of each debenture is $100 and subscriptions must be for a minimum of one debenture.

With the proceeds from this debenture offer, the Company will in whole or in part refinance its $16.9 million Series 1 Debentures currently bearing interest at 12 per cent and maturing on December 31, 2012 as well as help fund the Company's medium term needs.

The Series 5 Debenture Offer will close on December 17, 2012. A copy of the prospectus is available on the Company's website at and hard copies will be made available at the Company's Corporate Headquarters and Collection Agents within the next week.

Interested persons may contact the Company at 227-0954 or email [email protected].

Last edited by Marty; 11/21/12 10:17 AM.
Joined: Oct 1999
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Series 5 Debenture Offering

A local investment... with BIG returns

Price: $100 per Debenture. Minimum purchase of one debenture required.
  • Interest: 7.0% per annum, calculated from the date of allotment and payable quarterly on March 31, June 30, September 30 and December 31 of each year.
  • Maturity Date: December 31, 2024
  • Use of Proceeds: The Company will use the proceeds to re􀃶nance the Series 1 Debentures and to help fund its general operations and medium term needs.

Prospectus is available online HERE.

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BEL Debenture Offer Oversubscribed, Closes Early

We've reported extensively on the success of the first tranche of the city Council's Municipal Bond Offering - which sold like hotcakes. And while that bond instrument was mopping up some of the excess liquidity in the banking system, quietly BEL's Series 5 Debenture was doing just the same. The $25 million dollar Offer attracted almost 40 million dollars in subscription requests! And with that robust market response, BEL closed it off yesterday, eleven days before the scheduled closing date.

The Series 5 Debenture offer a fixed interest rate of 7 per cent and matures in 12 years. Each debenture cost $100 dollars. BEL is now considering offer another series of debentures in 2013 to meet the excess demand for financial instruments with an attractive interest yield - since the commercial banks are offering very low interest rates on savings - and in fact turning away many large depositors.

Channel 7

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