Three days after he confirmed government's intention to re-nationalize Belize Electricity Limited, Prime Minister Dean Barrow today re-stated his commitment to do all that is necessary to keep the lights on. Prime Minister Barrow was a guest on the Love FM Morning Show and explained that the crisis that has now turned one of the country's most profitable companies into financial ruin is beyond his comprehension at this time.
Prime Minister Dean Barrow
"We don't know how BEL has reached this pass when according to its last annual report BEL indicated in 2009 that in fact it was proposing a decrease in rates saying that they would still be very profitable. That could not happen because of their injunction, even as they proposed this; they kept in place the injunction that prevented the PUC from moving. With respect to 2010 their submission in terms of rates for the period July 2010 to July 2011 asked that the rates remain the same, of course the rates have remained the same. So you in your financials, in your annual statement say that the current rate is enough for you to be profitable but before June of 2010 you come to us and say we are insolvent, we can't pay we need this huge rate increase. I therefore said, look I have publicly made clear that the Government will not allow BEL to plunge this country into blackouts, the Government will not allow a cessation of power supply to this country, that would be simply disastrous, that would be chaotic, that is simply intolerable."
Meanwhile, for his part, BEL's Chief Executive Officer, Lynn Young, has offered his own explanation as to why the company got in the financial bind in which it finds itself. In a conversation with Love News last week, Young said that one of the reasons is skyrocketing fuel prices and said that as far as its management practices are concerned, Young said that the company has been accountable and transparent, with representatives even from the Government represented on its audit committee.
Lynn Young - CEO, BEL
"You look at BEL's statistics as compared to any other utility in the region. We are one of the top best managed companies in this region. I will tell you the members on the Public Utilities Commission have told me that personally, they have admitted that this company is a well run company, Ministers of Government has told me the same thing, yes the company is a well run company. We have a board of directors that has four directors appointed by the Government, two from Social Security and two appointed by the Government, Mr. Dillon Reneau he is also qualified in business, we have Mr. Rodwell Williams, the former law partner of the Prime Minister, he is a lawyer and he also knows a lot about finance. They both sit on our audit committee and they review our financial statements and our financial statements do not get approved by the board until the audit committee has reviewed it and satisfy themselves that it is accurate. The amount of money we have had to pay CFE is almost double what we normally pay them and so it has created a severe cash flow crunch on the company and we just can't meet all the bills. It could be all we need is an increase in rates now and maybe by the end of this year or next year it falls back. The taxi man has to raise his fees, the airlines has to raise their fees, the newspapers has to raise their fees, everybody because the price of oil affects everybody and it affects us more than most people."
Young has also blamed the PUC for actions it has taken against BEL.
Lynn Young - CEO, BEL
"The problem we have is that we cannot get loans to try and borrow money to pay for these bills until we can get things straightened out. The reason being is that the actions of the PUC has been such that the financial institutions are saying no they can't lend us any money until this thing is sorted out. Basically in their last rate review that they did the PUC went back in time and reversed approvals that they had given. So when we present our financial statements to a financial institution and say, listen this is how much we normally earn and this is how much we expect to earn so we want to borrow money and you can see from our performance that we can pay back the loans; they are looking at it and say no because the PUC can come anytime and change things back in time. What we have been trying to explain to the PUC and to the Government if the court is saying that the PUC can doing that legally then the Government will have to do something to make sure that that does not happen. They have to put something in place that when the PUC approves something it is an approval that we can rely on, and when the oil prices go up the rates have to get adjusted up. I think it was the Prime Minister who said that when the oil prices went down in 2009 that the PUC wanted to reduce the rates and we stopped them. We went to court and got an injunction because in 09 we made a proposal when the oil prices went down to resolve the crisis and give a two cents reduction in rates. Our application to the PUC that year, because I had spoken to Fortis and I said listen, the Government wants a reductions in rates, the oil prices has gone down but the PUC is saying that we owe customers 36 million dollars, if we have to refund 36 million dollars to customers, this is exactly what I expected, the company cannot find it that, we are going to be in trouble. I suggested to the Government and the PUC why don't we just cancel all of this and start afresh, the company has already lost some money but just let's forget it, forget this 36 million dollars that we are supposed to owe, let's put everything back on even keel and start again. We start with a two cent reduction in rates and the rates get adjusted up or down depending on how the oil prices move."
Marion Ali - Reporter
Fortis is a multimillion dollar company, the parent company, how do you expect the consumers to say let us just cancel the 36 million that you owe them?
Lynn Young - CEO, BEL
"Well the trouble is that the 36 million was manufactured by the PUC in the first place. They went back in time and reversed decisions and approvals that had happened long ago so you make business decisions based on these approvals."
Marion Ali - Reporter
How much would you say it is?
Lynn Young - CEO, BEL
"That we owe customers? I don't think that we own customers anything. One of the reversals was for the hurricane restoration. When the hurricanes came along, we jumped in, we did what we had to do, we got money from Fortis, from the banks. Then we made an application to the then PUC to recover some of it, not all of it, some of it. The then PUC looked at it and thought it was reasonable and approved it. This new PUC comes in and says no, no, no you should have done that yourself and customers should not have to pay for restoration so they reversed that, depreciation, there are a lot of little things. They looked one spell and said oh we think you made too much profit five years ago so you have to pay that back to customers. These were profits that were approved by the previous PUC and it worked out like 10% return on investment on that time. They are saying that is too high you should only be making 6% return on investment so they go back and reverse the profit. They changed the rules to be able to do that. That is like the government coming and changing the income tax rules and then go back and say you did not pay enough tax three years ago so you have to pay that. In addition to that Government raised our taxes by 8 million dollars in 2010 when we were losing money. The Government reduced the taxes on BTL which was making about 20 odd almost 30 million in profits we were making 6 million dollars in profits and the government increased our taxes by 8 million dollars so what's the message to us."
Young also said that its parent company, Fortis Incorporated, is not prepared to invest in the company based on the measures of the PUC. But he also explained that these are the reasons why Fortis is not prepared to guarantee any bank loans, which the banks are requiring. Meanwhile, Prime Minister Barrow says that despite misgivings about how BEL reached the point of insolvency, government's offer to buy back the company was made in the spirit of a friendly take-over.
Prime Minister Dean Barrow
"All Mr. Young can tell me is that the cost of power has gone up. The PUC, I met with the Chairman of the PUC yesterday, is convinced that just as the BEL annual statement suggests, the current rate is quite enough for BEL to be profitable, so there is again this huge divide now and this absolute lack of confidence on the part of the Government which you can understand because BEL is where it is. We accept them at their word when they say we are solvent, what we can't figure out is how you became insolvent and that is a huge mystery to all of us. I said to Mr. Young we do not want to go the route of a forced acquisition, would you find out from your principals whether they are prepared to sell the company; especially since Mr. Young had himself said the week before to the media, well Government needs to sort this out or take back the company. We said fine, as much as we don't want to we will have to take back the company if we are going to get the country out of this mess."
BEL's Chief Executive Officer Lynn Young has given his assurance to the Prime Minister that he will be conveying Fortis' response to the offer to buy back the majority shares in BEL as soon as a decision is made by the Canadian conglomerate. Fortis Incorporated has meantime been quoted in Canadian press reports as saying that it has not received a purchase proposal from the Belize Government for its majority shares in its BEL electric utility operations, despite the government issuing a news release expressing its interest.
LOVEFM
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