Nothing short of financial madness
This month you published a letter from me wondering why the Bermuda Government had failed to give its consent to the 2019 offer from Algonquin to purchase the shares of Ascendant Group Limited — the owner and operator of Belco — after an almost unanimous approval by the shareholders of the company at the beginning of 2019.
So far, David Burt, the Premier, has managed the coronavirus issue with considerable skill, and all of us should be indebted to him and his colleagues for their acumen.
However, one of the key issues that has not received the public attention it deserves is the problem of Bermuda as a community being able to earn foreign currency, in particular US dollars.
In the absence of foreign exchange, Bermuda could rapidly turn into an economic basket case. Without the earnings of the tourist industry, which has now dried up, Bermuda residents will be deprived of their main source of foreign exchange; and apart from the earnings of international companies, which are also adversely affected by the crisis, soon there will be a significant shortage of foreign currency to pay for essential imports.
This brings me to the procrastination that has characterised the Government since Algonquin made its US dollar offer for Ascendant. Apart from the eminently sound sense of the commercial project in normal times, the injection of US$200 million into the local economy at this moment in time is a lifeboat that only a fool would reject.
It was suggested early last year that the Government would give its consent by the autumn of 2019, but now it is March 2020 and there has been nothing but procrastination. This does not make any sense whatsoever.
Bermuda is in dire need of foreign currency and we are dithering about an attractive offer on the table of US$200 million. This is nothing short of financial madness.
In addition, we need the vast technical resources of Algonquin because should Belco cease to function efficiently, we would be in serious trouble.
But even more pressing, like all companies, Belco relies on revenue from sales and prompt payment from its customers in order to acquire cash to keep operations going and pay employee wages and salaries.
As the economy slows, buildings shutter, shops close and people work from home, electricity sales will also shrink, and that means revenue and cash will also shrink for the firm. As Bermudian workers are furloughed, it will become harder and harder for them to pay their electricity bills. Cashflows in all businesses will start to dry up and that includes the electricity company. It is within the realms of possibility that Belco in its present form could cease to function and, if that were the case, Bermuda would be in the midst of a perfect storm.
Consummation of the proposed deal with Algonquin will immediately provide the financial security that comes with a much larger balance sheet, and gives greater access to essential working capital. It will also inject $200 million into our foreign exchange-starved economy, and provide a much needed boost to us in our dire circumstances.
Additionally, Bermuda would have an international infrastructure partner that has made a commitment to $300 million in renewable investments and, possibly, even greater investment in Belco — from their published $9.2 billion capital plan over the next five years.
The Government needs to end its mercantilist opposition to the transaction with Algonquin and quickly make a decision that approves an investment of $200 million of much needed foreign exchange — as well as enhance our energy security.
So far the Government has acted with speed and resolve in the coronavirus crisis. It should also act in the same manner to ensure security of electrical power for the future.