Corruption Rocks The Bahamas Electricity Corporation - BEC

Corruption Rocks BEC

ByCandia Dames

candiadames@hotmail.com

Nassau, Bahamas

10/02/2004

 

 

The Bahamas Electricity Corporation lost about $100 million over the last five years as a result of businesspersons and BEC employees working in cahoots in an unscrupulous practice that involves meter tampering.

 

New figures reveal that BEC lost $18.54 million in 2003 in non-technical losses.  New Providence accounted for $14.79 million in losses and the Family Islands made up for the remaining $3.75 million.

 

This serious leak in the corporation's revenue has reportedly been having a direct negative impact on the corporation's profitability for decades.

 

As a result, BEC is in the process of installing new electricity consumption meters, which can be read remotely and automatically, reducing errors and consequential queries.

 

The meters will be installed at all residences in the Bahamas and in the Family Islands that get their electricity from BEC.  The corporation is also putting in place a more high-tech system to cut back on the losses suffered when BEC workers under read the meters of commercial clients reportedly for kickbacks.

 

BEC officials expect that this will also result in reduced labour costs, a reduction in the need to estimate bills and a reduction in customer service queries as well as an improvement in revenue.

 

The losses occur as a result of wrongful actions taken by some employees in reading residential meters, but primarily among commercial clients, the Journal has learnt.

 

According to documents obtained by the Bahama Journal in a recent investigation, over the last five years, BEC's operating and administrative expenses had an average increase of 42 percent.

 

But the corporation's revenues increased by only 37 percent during the same period.

Actuaries have warned that the disparity in those two figures would create serious concerns for BEC unless the problem is arrested.

 

Corporation officials, who have put in place aggressive measures over the last year to make BEC more efficient, are said to be concerned as well about abuse of overtime and stealing within the corporation.

 

The Journal has learnt that while BEC still has a lot of house cleaning to do, some turnaround is already evident.

 

According to documents, accounts receivables improved by about $40 million as of the end of September 2003, standing at about $60 million, compared to $104 million the year before.

 

But while BEC makes what management has called much-needed strides to improve efficiency, it is faced with reaching conclusion on a new industrial contract for members of the Bahamas Electrical Workers Union.

 

The union is making several demands, including wage increases and improved pension fund benefits. BEC employees make no contributions to their pension fund.

 

As it stands now, the corporation contributes what would amount to 13 percent of each worker's salary to the fund.

 

But a recent actuarial report determined that the plan is under funded to the tune of $22 million. The corporation this year plans to make up that shortfall by increasing contributions to 16.6 percent.

 

This would amount to an annual increase in contributions made by the corporation from $4.5 million to $5.7 million.

 

However, the union is reportedly demanding that that amount be raised to 26.2 percent, which would mean a contribution of $7.6 million.

 

Because of the increases it plans to make as a result of actuarial realities, the corporation says it is in no financial position to address the union's request for a change in the actuarial rate.

 

Both sides are also said to be locking horns over a proposed merit pay system, which would reward employees, beginning in the third year of the contract, salary increases between 3 percent and 8 percent according to their on-the-job performance.

 

The corporation estimates that the new industrial contract would cost BEC an additional $16 million over a four-year agreement; but the union is reportedly demanding a $26.9 million increase.

 

Now faced with mounting pressure from the BEWU's leadership, BEC's board executives continue to point to what they say are realities they simply cannot ignore.

 

But the board, led by former banker Al Jarrett, continues to highlight its key accomplishments, like refinancing Inter-American Development Bank multi-currency loans, which will save BEC tens of millions of dollars in interest and exchange rate costs.

 

Other achievements are an historic reduction in electricity rates throughout the Bahamas, which executives say has had a major economic impact on the entire Bahamian economy.

 

There is also now a 3 percent interest payment on all customer deposits; Major savings in oil storage facilities from the signing of a new five-year contract last July; and major savings from the signing of a new five-year oil contract.

 

Mr. Jarrett, who came to the corporation promoting a partnership between BEC's management and union, is now facing increasing accusations from union leaders that he is anti-union.

 

At a recent corporation function, the Chairman said, "We must pay closer attention to the issues that divide us by creating more dialogue with staff members at all levels. We must listen more - be more focused on the vision and the mission, rather than tearing down each other."

Insurance Companies in The Bahamas Unite to Fight Against Colina Insurance Company Acquisition of Canada Life and Imperial Life

The insurance companies have banded together in an attempt to prevent Colina from getting regulatory approval to acquire Canada Life and Imperial Life

Insurance Row Heats Up

Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

09/02/2004

A group of insurance firms fighting two pending acquisitions by Colina Insurance Company is charging that the Registrar of Insurance Companies reported "erroneous" information to the Cabinet Secretary.

The 10 companies, in a response letter to Secretary Wendal Major, said the Registrar, Roger Brown, drew some unfortunate conclusions on the market share that Colina might enjoy if the transactions were approved, by using the combined health and ordinary life premium levels as a benchmark.

Mr. Brown had written to Mr. Major accusing the companies of lying in a recent PowerPoint presentation to Prime Minister Perry Christie. Mr. Brown also said that their charge questioning the actions of his office as it relates to Colina "is most damning".

The insurance companies have banded together in an attempt to prevent Colina from getting regulatory approval to acquire Canada Life and Imperial Life.  Although there was a media report last week that Colina received approval for Canada Life, there has been no confirmation or announcement in this regard.

Mr. Brown said it was "misleading and or derogatory" for the insurance firms to say that Colina will control 70 percent of the ordinary life insurance market.

In his letter, he said, "The use of the potential 70 percent market share statistic is somewhat disingenuous as in the local insurance market the different companies (other than Laurentide and Atlantis Medical) do not sell just one product."

He informed that, "Life & Health companies sell a variety of products and in this market "market share" is determined by the gross premium income from all Life & Health products."

Mr. Brown said that if all the acquisitions were approved Colina would control 43 percent of the total Life & Health market.

But the companies in their letter to Mr. Major, dated February 4, said it appears that the Registrar "has missed the point entirely."

"Our concern is not only on the level of premium income in the insurance industry controlled by any one entity but is also based on the fact that the transaction, if approved, will create an entity that will control very significant long-term financial assets with significant implications for correlation of the capital markets of the Country."

The Registrar provided Mr. Major a breakdown of the gross premium income of Life & Health companies, but the group of companies against Colina's acquisitions said this information was erroneous.

They said the breakdown in the letter understated Colina's premium income.

"All the premiums would have to be placed on a more comparable basis for the calculations on market share to be accurate or meaningful," they said.

The Registrar, who wrote to the Cabinet Secretary on January 8, said when his office received a report that Colina was soliciting business before its license was approved, letters to cease and desist were immediately sent out.

"In addition, a meeting was held with the principals of the company and a warning given directly that they must stop whatever they were doing," Mr. Brown wrote.

The companies said this action by Colina "speaks poorly of the controls, procedures and corporate governance standards of Colina."

Given that as of January 8, the Registrar's Office had not seen a signed Heads of agreement or a Purchase Agreement, the companies said, "In view of that reality, we do not understand how it was possible for the [Office of The Registrar of Insurance Companies] to approve the letter sent under date of December 1, 2003 by Imperial Life to the affected policyholders.

"This is particularly in light of the fact that Imperial's letter stipulated a deadline which clearly would have been arrived at long before the ORIC could even begin to review the merits and implications of the proposed transaction."

Fighting Colina's acquisitions are executives of Atlantic Medical Insurance Limited; Bahamas First Holdings Ltd; Fidelity Bank & Trust International Limited; British American Insurance Company; Insurance Management (Bahamas) Ltd; Sunshine Insurance Ltd; Family Guardian Insurance Co. Ltd; Security & General Insurance Co.; J.S. Johnson & Co. Ltd.; and RoyalStar Assurance Ltd.

Customs Officer Accused Of Terrorizing Investors

By Candia Dames

candiadames@hotmail.com

Nassau, Bahamas

09/02/2004

Customs officials have reassigned a senior officer who had been stationed at Ocean Cay, near Bimini after he clashed with an executive of the AES Corporation, which operates an aragonite mining operation there.

 

In a report to Customs Comptroller John Rolle, Sandy Stubbs, the officer involved in the recent incident, said he feared for his life due to the "aggressive attitude and action" of AES Project Director Aaron Samson.

 

But Mr. Samson, whose company is also seeking the government's permission to build a liquefied natural gas plant on the cay, has denied that he was out of order in dealing with the customs officer, who he claimed was "terrorizing" AES workers.

 

The Customs Comptroller said that his officers are investigating the incident to determine exactly what happened and who may have acted improperly.

 

The whole matter stemmed from another incident that happened weeks earlier.

 

AES officials reportedly believe that Mr. Stubbs, who was stationed on the cay on a rotational one-month basis, was a good friend of a Bahamian AES worker who had been suspended by his supervisor. It is believed that Mr. Stubbs held a grudge against company officials.

 

Following the suspension, Mr. Stubbs allegedly ordered that AES Operations Manager Bruce Fitzgerald and diesel mechanic, Johnny Stott, be deported even after Immigration authorities on Bimini assured him that the expatriates had the necessary documents for their employment in The Bahamas.

 

But Mr. Stubbs insists that he was following proper procedures.  He reportedly confined the men to their quarters for hours then redirected an AES charter plane back to the United States with the workers on board.

 

Mr. Samson flew to Ocean Cay the following day to deal with the matter, which was reported to Trade and Industry Minister Leslie Miller and made an informal complaint to the Customs Department.

 

In his report, Mr. Stubbs said that Mr. Samson asked him to meet him at the AES office so that he could call the Minister, who had reportedly asked Mr. Samson to get the customs officer on the phone.

 

But Mr. Stubbs said he wanted to first call Customs headquarters in Nassau to inform authorities about the situation.

 

"I spoke to Mr. Miller and relayed the incident to him," he wrote. "Mr. Miller agreed with me for following instructions and procedures. However, he did ask if I could be more lenient with them (AES). He then went on to tell me about the LNG project in details and the benefits of such a project."

 

Minister Miller recently told the Bahama Journal that AES is "very close" to getting approval for the LNG project and the government expects to bring in millions of dollars annually as a result of the investment.

 

Mr. Stubbs said Minister Miller also asked him to come and see him when he came to Nassau.

 

Minister Miller confirmed to the Journal that he did speak with Mr. Stubbs regarding the incident, but he suggested that Mr. Stubbs may have exaggerated it.

 

The Minister also said he asked the customs officer to treat the foreign investors "in a delicate manner and with respect".

 

"I stated to him that I was concerned that you are ill treating foreigners," Minister Miller said. "I spoke with him for less than a minute. I asked him to be careful how he deals with foreign investors."

 

He also confirmed that Mr. Stubbs had locked away the foreign workers.

But Mr. Stubbs, in his report, claimed to be the victim.

 

Mr. Stubbs said after being approached by Mr. Samson, "I asked him if he was threatening a government official. He then asked me what kind of official do I think I am? He told me again that I was on his Cay. His and Leslie Miller."

 

He continued, "As I walked to the Customs office, he continued to follow me shouting at me and using degrading remarks to refer to me."

 

Mr. Stubbs also said in his report that, "After the phone conversation [with Minister Miller] Mr. Samson in an angry and loud voice, asked me who do I think I am and how dare I embarrass his people! I told him I was only doing my job and following procedures. He then said he don't quite care about procedures.

 

"He told me that he was having a meeting with his staff at the cafeteria and that I dare not come around there if I know what's good for me. I continued to walk to my office in silence and then proceeded to write this report."

 

But Mr. Samson said, "I categorically deny that I threatened him. It was an unfortunate incident. I got involved so that an unruly official would stop terrorizing and threatening my employees."

New Offer For Bahamas Telecommunications Company - BTC

New Offer For BTC

Candia Dames

candiadames@hotmail.com

Nassau, Bahamas

06/02/2004

The final bidder pushed out of the race to purchase a minority ownership in the Bahamas Telecommunications Company is preparing a new offer to make to the government, the Journal has learnt.

 

But the Tenders Commission is not now open to any new proposals, as it has started another phase of privatisation, which would take on another form from the effort initiated more than five years ago.

 

Still, Blue Telecommunications plans to approach the government with a more fine-tuned and "more convincing" plan.

Company officials are hopeful that the government would at least be willing to entertain them.

  

The group's President Lindbergh Smith on Thursday was not prepared to speak to such reports.  But he did hint that his company is still interested in having a stake in BTC.  "The Minister of State for Finance alluded to the fact that BTC still has to be privatised," Mr. Smith told the Journal. "As a Bahamian, I am encouraged by the fact that the government is still committed to privatisation."

 

Financial Secretary Ruth Millar, who chairs the Tenders Commission, has told the Journal that the government has given the Commission a new mandate to review other options for privatisation of the telephone company.  But Mrs. Millar declined to say much else.

 

One source close to the Commission said Thursday that it is "utter nonsense" for Blue to still be working toward a plan for BTC.

 

"Their plan was rejected because it was not in the best interest of BTC or The Bahamas," he said.  "The Commission has been instructed to end that entire phase."

 

In rejecting Blue, the Commission revealed that there were serious concerns regarding the company's financial structure.

 

Blue reportedly planned to help pay for its stake in BTC by using the phone company's assets to borrow.

 

But a Blue official has since denied this saying that was, "totally untrue.  That was not so.  It was totally speculation that was pushed by some of the members of the Commission who do not favour privatising BTC."

 

According to the official, it was Blue's original plan to borrow on the assets of the company.

 

"The government was not comfortable with that and wanted a clearer transaction," he explained.

 

He said that in its revised plan, Blue was prepared to do an all-cash transaction.  While Blue is reportedly preparing its comeback, BahamaTel Consortium, which was headed by Tom Bain, has given up on BTC altogether.

 

Shortly after the government rejected the BahamaTel offer due to what Mrs. Millar called a deficient business plan, Mr. Bain told the Journal that his group had come to the end of the line.

 

State Minister for Finance James Smith has said that the government is "shifting gears" as it relates to the privatisation of BTC.

 

In the meantime, he said BTC has to "continue to do things to develop and expand its managerial capabilities, develop its staff, while at the same time look for efficient ways of government having to divest its interests."

 

The plan of the former government was to privatise the then Batelco and give it time to prepare for competition before opening the market.

 

But with that process failed, the new government is looking more toward liberalization of the telecommunications sector with its Telecommunications Sector Policy reportedly being revamped.

 

The idea now is reportedly to prepare BTC for the onslaught of competition that is surely to come in the near future.

 

Speaking at the Bahamas Business Outlook seminar on January 20, Minister Smith said the privatisation process "ought not to be abandoned since a privatised BTC would not only provide additional funds to government for debt reduction in 2004, but should also provide increased capacity for expanding technology including high speed data transmission capabilities which are essential to the e-commerce development effort." 

Andros Island Seen as The Breadbasket of The Bahamas

The Potential of Andros as The Breadbasket to Feed The Entire Bahamas

Farming clearly should be and will be the lifeblood of Andros...

North Andros to Feed the Nation

 

By Gladstone Thurston

BahamaSeaWeed@groups.msn.com

Bahamas Information Services

February 6, 2004

 

 

Nicholl’s Town, Andros – The North Andros High School came in for commendations from Agriculture Minister V Alfred
Gray in its quest to feed the nation.

North Andros High is “the model for farming in all the secondary schools in The Bahamas,” added Labour and Immigration Minister Vincent Peet, the Member of Parliament for the area.

“I am pushing to get additional scholarships at the College of the Bahamas for those who want to take farming seriously,” Mr Peet told students.  “Until we can elevate farming to the level of respectability where it belongs, then many of you will still look at farming as a blue-collar work for somebody else to do.”

Mastic Point Primary won the H Newbold floating trophy for excellence in farming, a programme spearheaded by North Andros High last year.  Red Bay Primary was second, and Bowen Sound Primary came in third.  All primary schools in the district including those in the Berry Islands participated.

Ministers Peet and Gray led a delegation from Nassau to the North Andros High School agriculture rally and exhibition on Thursday staged by the North Andros High 4H Club in collaboration with the agriculture science department.

Also present were Deputy Permanent Secretary/Ministry of Agriculture Ursula Chisholm, Agriculture Extension Officer Stephen Adderley, District Superintendent Harcourt Davis, Administrator Dr Huntly P Christie, and Chief Councillor Alphonso Smith.  Joel Lewis is the principal at North Andros High.

“(The agriculture exhibition) comes at a time when we feel that providing food for ourselves is very, very necessary,” said agriculture science teacher and 4H Club co-ordinator Rai Budhu.  “We hope to motivate you to strive towards self sufficiency.

“It is important for a nation to be self sufficient in food.  A country, which is unable to provide its own food, can be in great problems.  You can eat every day the things that are produced right here in North Andros.”

Agriculture exhibits at the school’s sprawling farms, adjacent to its campus, featured a wide variety of edibles – pumpkins, cassavas, yams, potatoes, broccolis, cauliflowers, tomatoes, grapefruits and nonis - the latest cash crop.

Chickens, pigs, goats and ducks are also raised as part of the programme.

Already North Andros High provides a Nassau-based hotel and restaurant with fresh fruit and vegetables.

“I see Andros as the breadbasket of today and tomorrow,” noted Agriculture Extension Officer Mr Adderley.  “While there is limited farming going on at present, the potential for Andros is as a breadbasket to feed the whole nation.”

Mr Peet said the government is going to do much more to empower Bahamians, “especially you here in Andros where farming clearly should be and will be the lifeblood of Andros.

“Farming is something to look forward to.  It is a profession, which pays, and you would be doing a very valuable service to yourselves, The Bahamas and the world.

“The farmers in Andros have been frustrated for years.  We are about to ease that pressure for all farmers because farmers need to be respected and given the tools to earn a decent living.

“This exhibition is a very good example of the importance and the value that North Andros High is putting on farming.”

Agriculture Minister Gray urged Bahamians to consider agriculture as “serious business.”

He pointed out that farming provides an avenue through which the country’s economic base could be broadened while contributing to the country’s food security.

He warned of the “almost total reliance” of the country on a single industry – tourism, “an industry that is very sensitive to and is always driven by external forces over which we in The Bahamas have little or no control.

“It is important therefore for us to expand the pillars of our economy to include the agriculture and fishing industries.”

Another reason for agricultural economic expansion has to do with The Bahamas becoming more self-reliant.

“The fact is that we as a country rely too heavily on imports,” said Minister Gray.

In its effort to motivate farmers, the government has put in place a package of incentives, which include the provision of farmland, assistance in land clearing, duty-free exemption on equipment, and loan guarantees.

Mr Gray said he will be recommending to the government the granting of ‘start-up’ money for persons “who are serious about becoming involved in agriculture and who are willing to farm for produce, which are in high demands.

“I challenge you, therefore, to become partners with the government in making agriculture and fishing strong pillars in our country’s economic life,” said Mr Gray.

“I can assure you that those who are willing to become so involved would find this government’s attitude very embracing and supportive.”

The Bahamas Government to Rescue Bahamas International Securities Exchange (BISX)

Gov't To Rescue BISX Again

By Candia Dames

candiadames@hotmail.com

03/02/2004

The Cabinet plans to rescue the Bahamas International Securities Exchange (BISX) if its shareholders agree to match the $450,000 the government intends to provide it through the Central Bank, the Journal has learnt.

 

This financial shot in the arm would come nearly two years after BISX asked for $2 million in public funds.

 

A committee that was appointed to look into the affairs of BISX recently recommended that the Government of The Bahamas through the Central Bank "commit to continue its financial support of BISX for an additional amount of $450,000 over the next three years."

 

It also recommended "it be proposed to the existing and prospective shareholders of BISX that an additional minimum amount of $450,000 to match the government's support be subscribed for by way of a rights offering."

 

Minister of State for Finance James Smith said Monday that Committee Chairman Julian Francis "was told to go back and speak with the private owners [of BISX] and see if they are in accord with the recommendations [of his committee]."

 

A Bahama Journal source close to the matter said Monday that "the switch has already been flicked and things are beginning to happen for BISX."

 

Recognizing the great need for an institution like BISX to the country's developing economy, the committee, recommended late last year that the exchange receive help.  This would not be the first time that BISX would be receiving financial assistance from a government-related agency.

 

In 2002, the Central Bank gave BISX $150,000.

 

Start-up costs and losses experienced during the first two years of operations resulted in BISX approaching the government in mid 2001 to provide substantial financial assistance to support the continued functioning of the exchange.

 

When the government announces the decision to help BISX, it will surely be met by some criticism from members of the private sector, some of whom argue that the government should not be in the business of bailing out private companies.  Even an official in the Ministry of Finance seems to share this view.

 

In observations presented to the Minister shortly after the latest report on BISX was released, she wrote, "The recommendation for a further $450,000 of government financial support is divergent to the mandate of BISX being capable of operating without government subvention.  It is hoped that with the restructuring of BISX along with the implementation of the other aforementioned recommendations that BISX would become a more efficient, fully operational exchange that requires no government subvention."

 

The BISX report indicated that the existing shareholders in BISX are unwilling to inject any new capital in the exchange.  But it said that existing shareholders and new shareholders might be willing to support the exchange if certain changes were implemented.

 

An earlier Journal story on the committee's findings revealed that lavish spending on items such as furnishings compounded the exchange's financial problems.

 

The report also pointed to a number of reasons why BISX faced financial troubles, including the exchange's cost structure, significant cost overruns on management consultancy fees and the lack of anticipated public policy support.

Bahamasair Board plans to sue Shell Bahamas Limited

Bahamasair Suing Shell

By Candia Dames

candiadames@hotmail.com

02/02/2004

Bahamasair's board plans to sue Shell Bahamas Limited, claiming that the oil company has been unfairly charging the airline for use of its pipeline needed for refueling planes at the Nassau International Airport.

 

The Journal has learnt that the airline's attorney, Damian Gomez, recently presented a writ to commence the action against Shell, but the board was not pleased and asked him to strengthen the document.

 

An airline official said that should the board be successful in its actions, "the fuel bill would go down considerably."

 

The airline continues to pay Shell for fuel as well as for use of the pipeline or hydrant system that provides the fuel.

 

An earlier Journal report that revealed details of the dispute points out that the development of the hydrant was initiated by the former government in an attempt to reduce congestion on the ramp, caused by all the service vehicles around an aircraft at any given time.

 

This development reportedly was supposed to offer multiple fuel pits at each gate with an extension around the Family Island pier having small fuel carts at each gate eliminating the need for huge fuel trucks maneuvering around the aircraft.

 

The fee was introduced by the members of the consortium Esso, Shell and Texaco in 1995 after the redevelopment of the hydrant system at Nassau International Airport. Initially it was referred to as a hydrant fee, intended to recover the investment of $2.8 million spent to develop the system.

 

But Bahamasair officials say that they should not have to pay this refueling charge because Shell has already recovered the investment. They claim that the airline has been charged wrongfully to the tune of at least $1 million.

 

The airline official said, "It's important that we do anything we can to cut costs."  He claimed that the fee actually amounts to about $600,000 a year and Bahamasair should not continue to pay it.

 

But a Shell source pointed out that the gas company has to continue to pay maintenance charges for the airport facility.

 

"Bahamasair fails to understand that Shell has to make a profit," he said.  The board will undoubtedly face strong opposition from Shell as it proceeds with its action.

 

The board also reportedly wants fuel prices to be reduced, but the airline source said the main action at hand involved recouping the money Bahamasair paid to Shell that it should not have paid.

 

In an earlier interview with the Journal, Shell's attorney, Campbell Cleare, said that Shell would probably have been willing to reduce the cost per gallon of its gasoline to the airline by one or two cents. But he said at the time that Bahamasair was demanding as much as a 10 cents per gallon reduction, which would result in a loss to Shell of over $1 million per year.

 

Mr. Clear told the Bahama Journal then that, "This is not price gouging. The prices are reasonable. Shell deserves to make a reasonable profit. There's absolutely no other carrier that's complaining. Bahamasair is trying to squeeze Shell into an unfair position."

 

Bahamasair officials declined to go on the record late last week regarding their planned action before the courts.

 

The board has been taking a number of measures geared at saving the cash-strapped flag carrier millions of dollars. The battle against Shell is seen as one avenue for helping to trim expenditure and ease Bahamasair's burden on the taxpayers' purse.