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TUESDAY, OCTOBER 31, 2023
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PM told that BPL fuel hedge ‘in the money’ By NEIL HARTNELL
FAY SIMMONS t &WFO BTùGVFM and Tribune Business Reporters XPFT THE Prime Minister was Bahamas Power & Light’s (BPL) ATVCTUBOUJBMMZ told fuel hedge, which his administration BUF CFOFmUT has sought to discredit, was “in the money” even though fuel woes “substantially ate into the benefits”. t 3FQPSU Shevonn Cambridge, BPL’s current chief executive, in a July 30, 2023, SFJHOJUFT report to Philip Davis KC and Alfred QPMJUJDBM SPX Sears KC, then-minister of works and signalled the former Minnis PWFS IFEHJOH utilities, administration’s fuel hedging strategy had generated savings for consumt .JOJTUFS ers that were sufficient to offset the utility’s greater-than-predicted use of A%PO U USZ higher cost fuel. The report, which reviewed issues UP CFOE PO impacting operational performance at Clifton Pier’s ‘Station A’, said UIJT IFEHF
BPL’s hedged fuel price depended on the seven Wartsila engines that it housed “providing substantially more energy than they did” as well as using a fuel mix that was 60 percent weighted in favour of heavy fuel oil (HFO). That is cheaper than automated diesel oil (ADO) which, according to Mr Cambridge was supposed to only meet 40 percent of the Wartsila engines’ needs under BPL’s fuel hedging strategy. However, that 60/40 mix intended to support the utility’s 10.5 cents per kilowatt hour (KWh) hedged price, which was locked in from summer 2020 to October 2022, was never achieved in any of those years. “The units operated on 25 percent HFO and 75 percent ADO in calendar year 2020; 32 percent HFO
and 68 percent ADO in calendar year 2021; and approximately 50 percent HFO and 50 percent ADO in calendar year 2022,” Mr Cambridge wrote to Mr Davis and Mr Sears. However, according to BPL’s chief executive, who was not in the post when the fuel hedging strategy was executed, while the more expensive costs associated with this undesired fuel mix squeezed and slashed the anticipated savings for consumers it did not eliminate them entirely. “Luckily, the fuel hedge placed at that time was in the money,” Mr Cambridge wrote. “However, the adverse generation fuel mix substantially ate into the benefits realised from the hedge.” The phrase “in the money” triggered a heated back and forth
Hitting near 3% growth to make ‘incredible difference’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net ECONOMIC growth in the “upper 2 percent” range and above will make “an incredible difference” to The Bahamas’ economic prospects if achieved consistently, the Central Bank governor asserted yesterday. John Rolle, addressing the regulator’s 2023 third quarter economic briefing, said it was “very important” for this nation to break-out of its historical 1-2 percent low annual GDP growth pattern with a level above 3 percent something Bahamians should “feel comfortable” with. Responding to Tribune Business questions
t (PWFSOPS A7FSZ JNQPSUBOU UP CSFBL IJTUPSJDBM USFOE t 4FB BSSJWBMT AMFWFM PGG BCPWF QSF $07*% IJHIT t &YUFSOBM SFTFSWFT EPXO PO FOE BU CO on just how critical it is for the Bahamian economy to grow faster than its historical average, after earlier warning that there was now “a more discernible abatement” following the post-COVID recovery, he added: “That is very important because
it underpins a lot of the aspirations in terms of how rapidly for us we can see the kind of reduction in the debt burden relative to the size of the economy. “As well, it affects the pace at which there is employment creation. The estimates prior to the pandemic, which haven’t changed drastically, were that in ordinary times the Bahamian economy has the capacity to grow between 1-2 percent; somewhere in that range. “So if interventions can be made to add to the economy’s competitiveness and ability to attract investment, that would be what helps to allow the economy to grow at a faster rate on a sustained basis.” An annual GDP (gross domestic product)
JOHN ROLLE growth rate of between 1-2 percent is just where the International Monetary Fund (IMF) is presently predicting The Bahamas will end up in the medium term between 2027-2028. Asked what GDP growth rates The Bahamas should aim for, Mr Rolle replied: “The expectation is that we should feel comfortable if the potential growth rate for The Bahamas can rise above 3 percent. In the upper 2 percent, above 3 percent, that will still make an incredible difference on an annual basis as well as the
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Mortgage loan approvals decline to under one-third By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net LESS than one out of every three mortgage loan applications was approved in the 2023 first half despite total credit applications to the commercial banking sector increasing by 9.4 percent year-over-year. The Central Bank, unveiling the results of its 2023 first half lending conditions survey, revealed that total mortgage
applications fell by 8.8 percent “relative to June 2022” while approvals “narrowed by 1.4 percentage points to 32.2 percent”. John Rolle, the Central Bank’s governor, told the 2023 third quarter economic briefing yesterday that the mortgage loan segment was taking longer than its consumer and commercial counterparts to “turn around” and recover from COVID-19 and other ills with lenders “held back” because of the
extra time and size of nonperforming loans. “During the first half of 2023 bank lending conditions improved when compared to the same period in 2022. Total applications received continued to increase, underpinned by a rise in consumer loans,” the Central Bank said of its survey results. “Some 15,899 applications were received, 9.4 percent higher than the comparable period in 2022. The majority of
applications were processed in New Providence (81.6 percent).” The overall approval rate for applications was 75.2 percent, although that for mortgages was less than half this figure. “Consumer applications increased by 11.6 percent year-on- year, representing 89.8 percent of total loans processed. During the same period, the approval rate firmed to 78.1 percent,” the Central
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Digital payments ‘a train that is not going to stop’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Central Bank’s governor yesterday said he is aiming to “leapfrog The Bahamas to an even better digital payments state” as he warned: “This is a train that is not going to stop.” John Rolle, addressing the regulator’s 2023 third quarter economic briefing, said it was “incumbent” on the financial services sector to develop an electronic
payments system that Bahamians trust “if we’re going to be plugged into the rest of the world” at the same product and service standards. Asked by Tribune Business how the Central Bank and private sector plan to move forward, after the year-end 2024 deadline to eliminate manual cheque use was abandoned to give consumers more time to adjust, he added that there is no stopping the digital evolution despite
the “hang ups” caused by telecommunications and electricity outages. Mr Rolle added that the steering committee appointed to oversee the shift away from cheques, featuring Central Bank, banking industry and business executives, remained focused on educating Bahamians to ensure they are “comfortable” transitioning to digital payments given that such momentum cannot be halted.
“The focus is on giving the public more time to transition to alternative methods of payment, as well as to hunker down and get even more targeted improvement in the state of the alternatives,” the Central Bank governor said of the decision to delay cheque elimination by at least two years until 2026. “At the steering committee level focusing on
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SHEVONN CAMBRIDGE
JOBETH COLEBY-DAVIS
Minister: $21m ‘overrun’ on key BPL investment By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net A CABINET minister yesterday asserted that Bahamas Power & Light’s (BPL) key generation investment has suffered a $21m-plus “cost overrun” while failing to deliver the promised efficiencies and savings. JoBeth Coleby-Davis, minister of transport and energy, in tabling a review on BPL’s Clifton Pier ‘Station A’ in the House of Assembly said the $117.9m cost incurred to-date in purchasing and installing seven Wartsila-manufactured engines, and making the building fit-for-purpose, continues to accumulate. The present price tag, detailed in the July 30, 2023, report by BPL’s chief executive, Shevonn Cambridge, to Prime Minister Philip Davis KC and thenminister of works and utilities, Alfred Sears KC,
seemingly represents a 24.2 percent “overrun” on the initial $95m budget. The report, quoting a March 8, 2019, update to the Minnis administration’s BPL Board, said the thendirectors were told “the total investment required for bringing Station ‘A’ online with 132 MW (mega watts) of generation assets is $95m, inclusive of the costs of the generation assets, auxiliaries, building upgrades and sub-station improvements. “The costs for this new power plant will be funded by the expected insurance proceeds and allocations from BPL’s capital budget,” the former Board was informed. The “insurance proceeds” refers to the anticipated payout that BPL was to get from its insurers as a result of losing “two of the company’s most efficient units” - and 60
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