Simon Potter, Bahamas Petroleum Company (BPC) chief executive ...hopes that there would be enough Bahamian investor interest ...to indicate “a momentum of support” for Bahamas Petroleum Company ...and its oil exploration activities in The Bahamas

Oil Explorer Share Issue In Year-Long Gov't Approval Wait

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Petroleum Company’s (BPC) planned share offering to local investors has been delayed for over a year by the wait for the Government to give its consent for exchange control approval, Tribune Business can reveal.

 

Simon Potter, BPC’s chief executive, declined to comment on the issue when questioned by this newspaper, but sources familiar with the situation said the company’s application to the Central Bank of the Bahamas had been submitted around 12 months ago.

 

While the Central Bank has nominal authority on this issue, the real power lies with the Government, which has to give the ‘nod’ on applications by major investors for exchange control approval.

 

Such approvals are sometimes long in coming, as Cable Bahamas recently found out in seeking approval for its $100 million worth of US deals, and Tribune Business understands that, in similar fashion, BPC’s application has been sitting on the Government’s desk, not moving.

 

Exchange control approval is a vital prerequisite for BPC to launch its long-promised Bahamian Depository Receipt (BDR) share offering.

 

This is because the proceeds raised from the offering to Bahamian investors will have to be converted into UK sterling to purchase BPC shares listed on London’s Alternative Investment Market (AIM). These will then be backed by the BDR derivatives, listed and traded on the Bahamas International Securities Exchange (BISX).

 

Mr Potter, though, did reiterate BPC’s intention to proceed with its share offering as a way to give Bahamians an opportunity to buy into, at the start-up stage, an investment that could ultimately be enormously profitable.

 

Confirming that the oil exploration firm was in discussions with BISX and the regulators over the proposed offering, Mr Potter acknowledged that BPC as an investment was “not for everyone”.

 

Pointing out that an investment in the company carried “technical” as well as the usual ‘financial’ risks, Mr Potter said that because there were no commercial quantities of oil yet confirmed in Bahamian waters, BPC was a high reward/high risk offering.

 

But, while “success isn’t measured by take-up”, Mr Potter expressed hope there would be enough Bahamian investor interest to indicate “a momentum of support” for BPC and its oil exploration activities.

 

“Can I sit here and tell you when it will occur? No, but in terms of our prospectus, it’s in at the Securities Commission,” Mr Potter told Tribune Business, in response to queries over when the BDR issue might come to market.

 

“They’ve [the Commission] got their job to do, and we’re answering their questions. There are some considerations, and we’re listening to suggestions from BISX, the Central Bank and the Securities Commission.

 

“The company has its objectives, and these commissions have their statutes and rules. We’re listening to their suggestions.”

 

Added spice to BPC’s relationship with the regulators has come through Hillary Deveaux’s appointment as the Securities Commission’s acting executive director.

 

Mr Deveaux suggested as recently as late July, just prior to his appointment, that he would be “shocked” if the Securities Commission approved BPC’s share offering, on the grounds that the company’s primary listing was not on a top-tier stock exchange.

 

He explained that the oil explorer’s planned share issue to Bahamian investors did not meet the rules criteria he had left in place for such BDR issues.

 

This required companies, which decided to offer BDR shares to Bahamian institutional and retail investors, to have a primary listing on the world’s top stock markets - such as the New York Stock Exchange (NYSE) or London Stock Exchange (LSE).

 

This was designed to ensure BDR issuers complied with the necessary reporting and governance requirements for public companies, but Mr Deveaux argued that BPC’s primary listing - on AIM - did not meet the previously set criteria.

 

He described AIM, the UK’s junior stock market for incubator and developing companies, as one more focused on growth rather than regulation of its listed companies.

 

As a result, Mr Deveaux said BPC would be better advised to seek a listing on BISX’s ‘main board’.

 

And, failing to do that, he suggested Bahamians should go through the investment currency market and Central Bank exchange control regime, and buy shares on the London market if they wished to invest in AIM.

 

Mr Potter did not comment on BPC’s relationship with the Securities Commission or whether Mr Deveaux’s appointment may impact the BDR issue’s approval.

 

Sources close to BPC had previously described Mr Deveaux’s comments as “rather strange”, pointing out that it had to comply with numerous AIM listing, governance and financial reporting/disclosure requirements.

 

And Michael Anderson, president of RoyalFidelity Merchant Bank & Trust, which is acting as BPC’s financial adviser and placement agent on the BDR issue, said earlier that the rules referred to by Mr Deveaux had “changed quite substantially” since he left the Securities Commission.

 

Given that BPC has yet to prove beyond doubt that commercial quantities of oil exist in Bahamian waters, investors will effectively be speculating on the prospects of a ‘black gold’ discovery coming true.

 

In essence, the BPC BDRs are a venture capital investment, or ‘high risk, high reward’ play. There is a high risk that the company might find nothing, but by participating in equity ownership at the ground level, Bahamian investors would position themselves for potentially tremendous upside and wealth creation.

 

Mr Potter acknowledged this, telling Tribune Business: “An investment in a company like BPC is not for everyone, and the reason I say that is not only because there are the usual financial risks that occur with any investment, but for expansion companies there are technical risks that need to be understood and appreciated.

 

“Therefore, there are investment risks at either end of the spectrum. It can be a spectacular success, but if we don’t turn up any oil, we will have to get our thinking caps on.”

 

The BPC chief executive indicated there were ways to address any regulatory concerns about how the BDR issue would be pitched, agreeing that the offering had to be marketed “sensitively”.

 

“I’d like for there to be a large take-up where clearly there’s a momentum in support of the company and its objectives in exploring for oil in the Bahamas,” Mr Potter added.

 

October 02, 2013

 

Tribune 242

 

Caribbean Blog International

 

Value Added Tax (VAT) exempt companies

No industry VAT ‘zero rated’ except exporters

Domestic travel will not have VAT added

BY ALISON LOWE
Guardian Business Editor
alison@nasguard.com

Domestic and international transportation, educational, medical and dental services, as well as some financial services, sales and rentals of residential homes and certain bread basket items​,​ will all be VAT exempt, Guardian Business can confirm.

While some of these areas were anticipated as likely to be VAT exempt in the government’s white paper, others were not, including domestic and international travel. This includes both air travel and taxi and bus services, Guardian Business understands.​

International travel would be VAT exempt if purchased through a local supplier of travel services.

This selection of VAT exempt services and goods was revealed by VAT consultants at a recent meeting between the government’s VAT personnel and the Bahamas Society of Engineers.

​It adds to what is already known about the way in which financial services will be treated under the regime, including that most commercial bank services ​would be sold without VAT added, as would health and life insurance, while property and casualty insurance would be sold with VAT added.

​The VAT consultants confirmed that no industry, except exporters, would be categorized as “zero rated” under the VAT regime.

While VAT exempt companies would not have to charge VAT on goods or services sold, they would pay VAT on inputs. Unlike VAT registrants, that could not claim back credits on those inputs. Zero rated providers would not have to charge VAT but would also be able to collect VAT back from the government on inputs.

Exporters, as businesses which by definition sell goods outside The Bahamas to

non-Bahamians who are not targeted by our revenue regime would be encouraged to remain competitive by being given the opportunity to reclaim tax on inputs into their production processes despite not collecting VAT from their purchasers.

Yesterday, Randy Butler, president of Sky Bahamas, a domestic and internationally-active Bahamian airline that services destinations both within The Bahamas and in Florida, said that while he would be happy not to have to add a 15 percent VAT charge onto tickets sold to Bahamian travelers, he cannot say for certain if this category will benefit the industry.

Noting that aviation fuel is currently subject to significant taxation, Butler said he could only make an ultimate judgment on how the VAT exempt category would work out for the airline once he knows if there would be upwards or downwards adjustments to taxation charged on fuel and maintenance-related parts.

“I may have to increase the cost of tickets anyway due to increased input costs. (Being VAT exempt) sounds good but I need to see what my vendors and my costs will be. I may automatically have to pass that on; I dont know how it will pan out,” said Butler.

September 30, 2013

thenassauguardian

Caribbean Blog International

Perry Christie and his blah, blah, blah Progressive Liberal Party (PLP) administration

Perry Christie and the PLP’s blah, blah, blah government

By Simon
frontporchguardian@gmail.com

Imagine many years hence an anthropologist at the University of The Bahamas using digital recordings of the ZNS evening news broadcast to conduct research on Perry Christie’s years as prime minister. What might they discover?

As a gift to posterity and to help future researchers save time and effort, we are already able to pass on some insights which will only solidify over time.

Notably, Christie and the ZNS evening broadcast share a singular trait. They are incorrigibly late, again and again and again. It seems that ZNS, despite decades in operation, is daily caught by surprise that the evening news is scheduled to begin at 7 p.m., not 7:02 or 7:05 or 7:07.

ZNS, like the Christie administration, seems incapable of being embarrassed by the poor quality of so much that it does and its sheer and entrenched incompetence.

As an aside, the day that the two leading print journals revealed details of a report on alleged abuse at the detention center, the state evening broadcast news failed to report the story. Were they commanded to do so as an act of censorship by their political minders and bosses?

How free is ZNS today to report stories critical of the PLP? For many, why is 2013 starting to feel like the 1970s and 80s at ZNS?

Meanwhile, forget the numbers’ houses. Perhaps the government might consider a national lottery that has as the winning combination the exact time that the ZNS evening news broadcast begins, with the additional prize of a ZNS news mug for anyone guessing 7 p.m. Supplies of the mug are unlikely to run out.

Perhaps there can be a “Straight Seven Jackpot” payout, the winner having wagered correctly the staggered times the news begins seven nights running, which will be a monumental accomplishment. There can also be payouts for three out of seven nights or five out of seven. The combinations are endless.

How foolish to imagine such a lottery. It was already defeated in a national referendum that proved to be a spectacular failure for Christie and his new and improved Gold Rush PLP that would be ready in the First 100 Days and from day one to build a bridge to the future as the government of hope and help committed to Urban Renewal 2.0 and putting Bahamians first.

Were there an international prize for sloganeering as a substitute for ideas and governance, the PLP would consistently win it, with its endless ability to produce more slogans than common sense and action once in office.

Then there would be the Bahamian television broadcast award for political showboating and theater, jointly awarded to ZNS and the Christie administration.

Story one on the evening news: Perry Christie said today, “Blah, blah, blah.” Second story: Perry Christie said today, “Blah, blah, blah.” And just for a change in the third story: Perry Christie said today, “Blah, blah, blah.”

This is the blah, blah, blah government in two senses. First, it is an uninspiring and visionless government. Secondly, as before, this is a government of plenty talk and little action.

During and after his rambling meanderings, one knows that the prime minister said something. The problem is that one is not exactly sure what he’s actually said.

As opposed to those times, sometimes he literally says nothing, despite promising a fuller accounting. The country is still waiting for Christie to provide more details on his and the PLP’s relationship with Peter Nygard.

Then, there is Christie’s pretzel-like comments. Having repeatedly postponed speaking before the Constitutional Reform Commission, the prime minister sought a clever out, perhaps convincing to him, but unconvincing to most Bahamians. His excuse: He didn’t want to prejudice the commission. Really?

Perhaps ZNS can provide a useful service, namely a canned laugh track as used in situation comedies. It can be played whenever the prime minister offers a comment for which laughter is the best medicine and response.

As reported in the press, the governor general, the leader of the opposition and many notable Bahamians found the time to prepare for and to appear before the commission.

Cue laughter: Christie contradicted himself by stating that his attorney general had already offered the government’s thoughts. Why didn’t he say that when he canceled appearing before the commission for the second time and counting?

Did the attorney general prejudice the commission by speaking on behalf of the Christie administration?

The saying goes, “If you don’t laugh, you’ll weep.” Listening to the prime minister’s tortured rationales for his inaction and bumbling incompetence is likely to produce tears of laughter, sometimes just weeping, and sometimes the wailing and gnashing of teeth.

Mind you, the same prime minister who did not find the time to appear before the commission did find time to deliver a lecture on constitutional reform. He had plenty to say on that occasion.

What he did not say and did not do, was to accept responsibility for making the referenda process in The Bahamas more politically difficult and charged, more of which in a subsequent column.

When he’s not too tired to answer questions, answers to which he solemnly promised long ago, Christie is busy making speeches and excuses as a substitute for governing.

He seems still to believe that talk is action. Like a genie, he must believe that when he speaks, things are supposed to materialize. See for easy reference: National stadium, National Health Insurance and doubling the investment in the national education budget.

The prime minister recently said that he knows that Bahamians are frustrated. The problem is that he may not appreciate that Bahamians are mostly frustrated with his poor leadership of a government that is performing even worse than the do-nothing years of 2007 to 2012.

Ranking PLPs and younger PLPs, including many professionals, are soured on and vex with a feckless administration careening from one crisis to the next, with a prime minister barely in control of his own government.

Christie’s response, “Blah, blah, blah...”, all of which can be seen on the ZNS evening news beginning at only God knows when. Stay tuned and be prepared to laugh and to weep.

September 26, 2013

thenassauguardian

Caribbean Blog International

The Economic Consequences of Value Added Tax (VAT) are real ...and every business and retiree needs to know how his life, his company and his bank account will be affected by the Value Added Tax (VAT)

The Consequences Of Vat Are Real

By JOAN THOMPSON

Nassau Institute

Ishmael Lightbourne, consultant to the Ministry of Finance, in an ad hominem attack on the Nassau Institute describes the research report, ‘Consequences of the Value Added Tax for Bahamas’, as being “extreme, ridiculous, exaggerated and inaccurate”, and is being read because it “bashes” the Government.

Mr Lightbourne also accuses the Institute of promoting ideology he describes as “spending cuts to reduce the size of government and slashing the fiscal deficit”. Pity governments of both political parties failed to foresee the consequences of reckless spending and the ever growing public debt. There may now be concerns about the creditworthiness of the country’s debt among the lenders. The increased risk attracts higher interest rates for the lenders, and the likelihood of lower living standards for the borrowers, the Bahamian tax payer.

As for the statement “it is only being read because it ‘bashes’ the Government”, Mr Lightbourne may not know that businesses across the country are reducing hours of employment, cutting margins, trimming expenses and other measures to compensate for currently reduced economic activity and ever-increasing costs.

 

The Economic Consequences of the VAT are real and every business and retiree needs to know how his life, his company and his bank account will be affected by the Value Added Tax (VAT).

Bashing government may be an outlet for genuine fears and frustrations. Who would blame them?

 

September 30, 2013

 

Tribune242

 

Caribbean Blog International

 

...troubled by Bahamas Petroleum Company (BPC) CEO Simon Potter’s recent comments ...that the financial terms his company “tied down with The Bahamas Government are second to none.”

By Kendea Smith
Jones Bahamas

Free National Movement (FNM) Deputy Leader Loretta Butler-Turner says she’s “troubled” by Bahamas Petroleum Company (BPC) CEO Simon Potter’s recent comments that the financial terms his company “tied down with the Bahamas Government are second to none.” She is now questioning what those financial terms are and is calling on the government to respond to those claims.

Just last week, Mr. Potter told a room of potential investors in London that the financial terms with respect to any oil extraction are likely to be “music to people’s ears.”

Mrs. Butler-Turner says Bahamians are being “left in the dark” when it comes to oil exploration and BPC’s general activities.

The FNM deputy leader said it’s obvious that the Progressive Liberal Party (PLP) is putting “foreign interests first and the Bahamian people “dead last” in terms of providing information and consultation on potential oil resources owned by The Bahamas.”

“The FNM reminds the Bahamian people that both Prime Minister Perry Christie, who is also the minister of finance, and Deputy Prime Minister Philip Davis both served as consultants for BPC prior to the 2012 general election, during which a referendum on oil exploration was promised,” she said.

“When exactly will that referendum be held so that the PLP can keep that promise as well as the promise of putting Bahamians First? Additionally, when will Mr. Christie and Mr. Davis disclose the handsome financial terms they received as consultants for BPC?”

Mrs. Butler-Turner said she also has questions about discussions BPC had with the government over a referendum for oil drilling.

“What does the BPC CEO mean that ‘underneath the surface’ that any discussion of a referendum has been removed,” the deputy leader questioned.
 
“Oil exploration is a monumental decision for the country. It must be approached with deliberation, accountability and transparency, little of which now appears to be the case. The Bahamian people and the Official Opposition deserve and demand greater transparency and answers from the Christie government relative of the claims made by the CEO of BPC.”

September 26, 2013

The Bahama Journal

...the financial terms that currently exist between Bahamas Petroleum Company (BPC) and the Bahamian government are “nonsense”

Govt urged to address oil terms

Senior oil sector source calls financial benefits ‘a give away’

By Alison Lowe
Guardian Business Editor
alison@nasguard.com

The government is being advised to move quickly to update the terms of its agreement with Bahamas Petroleum Company (BPC), which have been dubbed by BPC itself, in addition to by local and international oil industry watchers, as extremely favorable to the company.

Earl Deveaux, former minister of the environment under the Ingraham administration, told Guardian Business that he agrees with BPC Chief Executive Officer Simon Potter’s assessment expressed at a recent London energy conference that the terms on which the government and BPC and its partners would share any oil revenues would appear to be “second to none” in the world for their generosity to the oil company.

Deveaux told Guardian Business that these terms and many other issues should be subject to greater public discussion.

In an address to the London Global Energy Conference on September 16, Potter said that the financial terms surrounding any potential oil discovery in The Bahamas are likely to be “music to people’s ears” given that they revolve around a “simple royalty” payment to the government of 12.5 percent, increasing to 25 percent if oil extraction reaches over 350,000 barrels a day.

Potter noted that the government could seek to change the terms, but highlighted that the Privy Council in London “ultimately remains the final court of appeal” in The Bahamas, suggesting that a legal challenge could be launched were the government to seek to change the terms.

Yesterday, a senior oil industry source in Trinidad and Tobago, which has long benefitted from its own highly-developed oil sector, told Guardian Business that the financial terms that currently exist between BPC and the government are “nonsense”.

“It would amount to a giveaway of the oil sector,” said the source, speaking on condition of anonymity.

He noted that while Potter highlighted a zero income, corporate or capital gains tax environment in The Bahamas from which the oil company would also benefit, in Trinidad and Tobago royalty payments are accompanied by a production levy on gross income from crude oil, a supplemental petroleum tax based on oil prices that range from zero to 35 percent, a petroleum profits tax or corporation tax charged at 50 percent of gross revenues from all sources less deductible expenses and allowances, and an unemployment levy of five percent.

“Trinidad and Tobago has applied a high taxation regime and has been very successful in doing so,” said the source. “They should think about making changes sooner rather than later.”

Deveaux agreed it would benefit the government to address the financial terms in the short term, rather than waiting until BPC has secured its drilling partner, which it is seeking to partner with to undertake the exploratory well, or until after exploration occurs.

“I would agree that the terms of the petroleum leases are very generous and I have no idea what he’s offered to his prospective investors, but if it reflects what the government has provided for in the lease I expect it would be among the most generous in the world.

“I’ve always maintained publicly and privately that if we were to ever go down the road of exploiting oil reserves in The Bahamas, we would have to sit down and renegotiate those things.”

“I think it is infinitely easier now for the government to undertake any contemplated change that it may wish than if it waited until an exploratory well is drilled or a commercial discovery is made.”

Deveaux said that he sees a broad-ranging discussion about many aspects of what it means for The Bahamas to develop an oil industry as necessary and lacking at present.

“There hasn’t been any discussion, and it’s unfortunate,” said Deveaux.

“We have plenty reasons to review the overall regime and legislation. It was done at the time when certain things were not a part of our reality. We didn’t have Exxon Valdez, the BP oil spill, deep sea drillings off Mexico or Brazil and we didn’t have prospect of rising sea levels from temperature increases. We have to factor in today’s realities, and there are compelling reasons to review it.

“I think the financial reasons are important (reasons to review the terms), but I don’t list them as any more important than others. I would be engaging BPC in discussions about how we would manage this resource for all the reasons I listed and how we would create capacity in The Bahamas.

“There’s the whole review of how natural resource contribution of The Bahamas’ environment is now comprised; We have fishing, recreational tourism, aragonite and pristine waters that have been the host of world wide research in a number of areas. How do you factor that in with a companion oil industry?”

In his address to the Global Energy Conference, Potter described efforts to “bring the (Bahamian) government along” with respect to the development of an oil sector.

This included describing the differences that would exist between any oil extraction that would occur in The Bahamas versus the operation that was undertaken in the Gulf of Mexico prior to the 2011 oil spill, in light of differences in the depth of the drilling, the rock formations in The Bahamas, and the equipment that would be used, among other factors.

The company has completed an environmental impact assessment (EIA) and has an environmental management plan currently being developed. The government has committed to updating oil sector regulations in short order, although it has not indicated if this would include any changes to the financial terms specified by Potter in his address.

Efforts to reach Minister of the Environment Kenred Dorsett were unsuccessful up to press time.

September 24, 2013

thenassauguardian

Caribbean Blog International

Value-Added Tax (VAT) was approved by the Free National Movement (FNM) and Progressive Liberal Party (PLP) governments... ...The question now is: When will it be implemented?

Pm Accuses Critics Of Vat 'Distortion'

By NATARIO McKENZIE

Tribune Business 
Reporter

nmckenzie@
tribunemedia.net

PRIME Minister Perry Christie yesterday hit back at critics of the Government’s proposed Value-Added Tax (VAT), accusing them of “distortion” and urging the International Monetary Fund (IMF) to publicly back his administration’s plans.

 

“All over the region and the world VAT has been implemented. The IMF has described it as one of the most efficient forms of taxation,” Mr Christie said.

 

“Both governments, FNM and PLP, committed to VAT, and it was only a question of when it would be implemented. We came in and indicated that we would implement it.

 

“We are putting together all of the teams and everything to do with having people educated, and having them participate in discussion on it, so people will become aware of the intention behind it and the effect of it, and how it will be used to better the Bahamas.”

 

His comments came after the Nassau Institute think tank this week released a study entitled ‘The Economic Consequences of the Value-Added Tax for the Bahamas’. The study was produced by David Godsell, a third year PhD student at Queen’s University in Ontario, and a former Canadian Revenue Agency tax auditor.

 

It estimated that VAT’s implementation would result in a net $165 million decline in the Government’s total annual revenues, while the private sector would incur a collective $103 million annually in compliance costs.

 

In addition, the Bahamian economy would see a reduction in per annum GDP of between $322 million and $483 million. The report said studies had shown a tax increase equivalent to 1 per cent of GDP resulted in a GDP decrease of between 2-3 per cent.

 

Hitting back at the report, Mr Christie said: “When I read of the study commissioned by the Nassau Institute, I was not surprised. They have always taken positions that they say are protective of the economy, but in this case we thought the study was predicated on incorrect premises.

 

“One of the things that I know we must put in place is the capacity to answer quickly, through informed persons, who are not politicians, these issues about VAT.

“The call I made today is for the IMF, which comes into the Bahamas, and other countries around the world, to indicate whether you are on course with your economy or are managing your economy in the right way, that they have a vested interest to protect the debate and ensure that factual inaccuracies and political distortions do not violate the integrity of what we are trying to do.”

Mr Christie added: “There are lots of people who, for their own reasons, will distort the truth of VAT and use misinformation to cause people to say: ‘I don’t want it’, and we think that it has a disastrous outcome for a country that is following on really with unanimity in policy, where both governments - past and present - are in agreement with the implementation of a new form of taxation.

 

“For the last five years this has been an issue for us, and now that we have begun the process of implementation we want to ensure that there is honest commentary and that people have an opportunity to hear what it is all about without it being distorted. People have jumped the gun on it, and you have a lot of distortions on what VAT is and what it is intended to do.”

 

September 20, 2013

 

Tribune242

 

Caribbean Blog International