A group of Ascendant Group Ltd shareholders intends to raise concerns about the direction in which the company is headed at Friday’s annual general meeting.

The five are all former managers at Belco, a subsidiary of Ascendant, and they believe the electricity utility is committing itself to using natural gas as a fuel — at a conversion investment cost in the hundreds of millions of dollars — without properly exploring alternatives.

The group claims that Ascendant chairman and chief executive officer Walter Higgins has a conflict of interests in that he is chairman of South Jersey Industries, a Pennsylvania-based group that has interests in the Marcellus shale natural gasfields.

And the disgruntled shareholders will also demand information on directors’ remuneration in the belief that board members have not suffered financially, while the shareholders that the directors represent have seen their dividends fall by nearly four-fifths over the past decade.

Ascendant responded to these concerns yesterday (see related story).

Ron Lucas, Belco’s former human resources senior manager and one of the group, said in an interview: “We’re a group of shareholders objecting to the way the company is being run. We’re only interested in seeing the company back in good stead. And we’re more concerned about the future of the Island than Belco, because what’s right for Bermuda will be right for Belco in the end.”

Another member of the group, Rod Holloway, Belco’s former manager of common services, said it was critical that a review of the options for the future of the Island’s electricity supply was carried out — especially given the plunge in the global price of crude oil over the past year that had significantly changed the arithmetic around the choice of fuel for the future.

“In the past at Belco, we always used to look to use an outside consultant to add perspective,” Mr Holloway said.

The group are concerned that the agenda for Friday’s AGM does not include the item “any other business” — something they say has traditionally been included in the past to give shareholders an opportunity to air their opinions.

Mr Lucas wrote to Ascendant company secretary Cheryl-Ann Mapp to request that “any other business” and “directors’ remuneration” be included on the agenda.

In an e-mail, dated May 21, Mr Lucas warned that if these items were not added he would inform the press that “in my opinion and the opinion of others the Board is deliberately suppressing the voice of shareholders”.

Ms Mapp replied that directors’ remuneration was governed by company by-laws and was “not the remit of shareholders”, while “any other business” did not appear because “the Notice should contain all the business to be considered” at the AGM. That the board intended to suppress the voice of shareholders was “wholly untrue and unwarranted”, Ms Mapp added.

Mr Lucas wrote back that the AGM was “perhaps the one opportunity each year for individual shareholders to ask questions of the Directors related to company performance and actions which on this occasion the Agenda denies”.

Mr Lucas said Mr Higgins had called him personally to reassure him that he would get an opportunity to ask questions at the AGM.

Shares of Bermuda Stock Exchange-listed Ascendant have collapsed from $42.50 to $5 over the past ten years. Over the same period the quarterly dividend payout has plunged from 39 cents per share to eight cents.

Last year, the Ascendant board decided to slash the quarterly dividend from 21 cents to eight cents, given diminishing sales and profits. Mr Lucas believes the directors’ remuneration should reflect this.

“The dividend has been cut in half, so the directors’ remuneration should also be cut in half,” Mr Lucas said. “That is what we wanted to propose.”

Ascendant last month announced profits of $5.9 million for 2014, generating a return on equity that the company described as “unacceptably low”, after years of declining electricity sales due to a declining population and a struggling economy. And the company also revealed it will request permission from energy regulators to raise electricity rates.

In the coming weeks, Ascendant will also submit its Integrated Resource Plan to Government outlining its views on the future of Bermuda electricity supply, with the centrepiece being a plan to switch from fuel oil to natural gas as a principal fuel.

This would involve building a new terminal to receive liquefied natural gas (LNG) shipped in from overseas, where the cooled and pressurised liquid would be regasified before being sent via pipeline to Belco’s Pembroke generating plant. Most of the 17 engines now burning oil to generate electricity would also be converted to burn natural gas.

The group, which includes an energy expert and engineer, agrees with Mr Higgins that the need for Belco to replace ageing generators is urgent. But they believe the company is underestimating the cost of conversion to LNG.

In an interview with The Royal Gazette last month, Mr Higgins estimated a “ballpark figure” of $170 million to get Belco ready to burn LNG. The group estimates the necessary investment would be more than $250 million.

“Who is going to invest that amount of money in a company that is making only about $5 million in profit?” Mr Lucas asked. There were two probable solutions, he said. Either a loan from an LNG supplier in return for a long-term contract of up to 30 years, or a takeover of Belco by an LNG supplier.

This theory led them to be concerned about Mr Higgins’ alleged conflict of interests as chairman of South Jersey Industries. “Walter Higgins is now chairman of a huge LNG holding company and so his interests are primarily related to promoting LNG and not looking at the best solutions for Ascendant and Belco,” the group stated.

Bermuda needed to be aware of environmental and safety concerns surrounding LNG, they added. These included the potential for “potentially catastrophic” explosions, terrorist attacks and the requirement for exclusion zones around regasification plants that “would not be possible on land in Bermuda”.

While they agree that natural gas was “the environmentally cleanest fuel”, they said there was potential for methane leaks more environmentally damaging than carbon dioxide produced from burning fossil fuels.

The group added that with fuel development and energy price changes over the past two years, there was a need for a study into the best short- and long-term solutions for the Island by an independent engineering consultant with expertise in electricity generation for smaller communities.

Mr Lucas pointed out that the US Virgin Islands had chosen liquid petroleum gas (LPG) after a review.

Regardless of the long term, urgent action is needed now to refurbish Belco’s generator fleet, according to the group, which argues that Ascendant needs to make a $20 million annual profit just to replace and refurbish its engines and infrastructure.

“If Bermuda’s economy picks up to the extent that electricity demand is where it was a few years ago, then we would be getting brownouts,” Mr Lucas said. “Belco urgently needs two new engines now and two more in the next few years. This will cost about $80 million for four new engines and a new building to house them.”