Though Prime Minister Philip Davis repeatedly told Parliament in the past he had no knowledge of any requests to execute Bahamas Power and Light (BPL) fuel hedge trades after coming to office in 2021, he explained yesterday his government’s decision not to accept recommendations to execute the trades, and insisted it turned out to be the right decision for BPL and the Bahamian people.
“There was a request to renew one of the hedges that was expiring and our government declined to do that,” said Davis, but he did not say at what point he finally learned when and why someone in his administration decided not to conduct the transactions.
“Instead of choosing to pay new premiums, we decided to focus on making progress on the very significant arrears that they (the Minnis administration) left in place.”
Davis then told Parliament that the former administration had also declined to execute trades months earlier to lock in oil prices and keep BPL’s fuel charge stable.
“You know who else declined to renew the hedge? The previous government,” said the prime minister during debate on a resolution for the House to adopt the 2022 Fiscal Strategy Report and the Medium-Term Debt Management Strategy.
“They had the same opportunity in June 2021. You wouldn’t know that, not from all the noise they make, so in 2021 June, they had the opportunity as well, but they declined.”
Opposition Leader Michael Pintard denied that the Minnis administration rejected a request to conduct fuel hedge transactions in June 2021 and Davis did not table anything to support the claim.
Over the course of months, Pintard has accused the Davis administration of costing the Bahamian people millions of dollars in savings by rejecting recommendations from BPL’s fuel hedge committee to conduct the transactions in the fall of 2021.
Members of the committee included the CEO and CFO of BPL, the head of risk, as well as others, including an outside consultant. Deloitte was the consulting firm for the hedge program.
The prime minister said yesterday executing the trades would not have helped BPL.
“When Russia invaded Ukraine in February 2022, oil prices spiked higher than markets had predicted before the invasion, but remember this, in any case, the hedge we were asked to renew would only have covered a period beginning in July 2022, not immediately; July 2022,” Davis said.
“The highest oil prices were in the months immediately following the invasion. The renewed hedge would not have covered that period.
“In September 2021, deciding to deal with the emergency in front of us instead of making a forward gamble, was a reasonable decision, Madam Speaker.”
But in the House of Assembly, previously, the prime minister, in fact, repeatedly distanced himself from any decision on failing to hedge, insisting that even as minister of finance, he had received no briefing on the matter and had not been involved in any decision-making on it.
Davis said on November 17 that if in fact a decision was made to reject the trade requests by technical people in his administration, they probably made the decision by guessing what his thinking on that matter would have been, but he said he had no involvement in the decision.
The prime minister said specifically, “You have to understand what you’re doing when you’re asked to do it, and so if it were that requests were made for the execution of the trade, it probably didn’t reach my attention because the technical persons who may have seen it, they know what Brave would have done in that circumstance; they would have examined the circumstances and decided whether or not it was an appropriate and prudent thing to do.”
On November 21, 2022, Davis had maintained that he had no knowledge that the fuel hedge committee had made requests in the fall of 2021 for the fuel hedge trades to be executed, although Minister of Works Alfred Sears told Parliament earlier that it was the minister of finance (Davis) who made that decision.
“What I do know is that the financial secretary had some views about it proceeding and I think those were the views that were adopted,” the prime minister said.
“I had no knowledge of it. He (Alfred Sears) said the Ministry of Finance had knowledge of this. That’s a big ministry. It was not me.”
Yesterday was the first time the prime minister provided an explanation in Parliament on his administration’s thinking on the BPL fuel hedge matter upon assuming office.
Davis’ shift in tone regarding knowledge about the fuel hedge recommendations is likely to further fuel the issue.
‘Patently false’
Yesterday, the prime minister sought to put the blame for BPL’s troubles at the feet of the Free National Movement (FNM).
But Pintard insisted Davis was speaking an untruth when he said the FNM administration rejected a request to execute trades in June 2021.
“The member seeks to make an excuse for the egregious act carried out by the member for Fort Charlotte (Sears) who in turn linked him very closely to the decision not to continue the hedge program, which we believe has resulted in a 163 percent increase in fuel charge,” the opposition leader charged.
“This House this morning was provided with information that is patently false. The reality, I challenge members oppose to lay on the table any Cabinet paper which was prepared for a June presentation of a hedge program to the Cabinet of The Bahamas. It was never intended to do so.
“In fact, it was in September (2021) that it was expected that the hedge program, the next round of it, would have been presented to Cabinet for an October execution. Misleading, Madam Speaker.”
The Fiscal Strategy Report, which the prime minister tabled last week in Parliament, points to BPL having arrears of $150 million.
It reads, “The recent disclosure of approximately $150 million arrears of Bahamas Power and Light (BPL) represents a significant unbudgeted liability of the government.
“To ensure continued provision of essential electrical services to the public, the government has committed to ensuring payment of this liability by the corporation.”
The opposition has concluded that the arrears came about as a result of the government’s refusal to execute the trades.
Addressing this matter yesterday, the prime minister said, “If you go to the page that speaks to the $150 million contingent liability of government, what it speaks of, it speaks of the government undertaking to pay a legacy debt of an arrears for the fuel that was owed to the fuel supplier.
“That’s what that $150 million deals with, nothing to do with a hedge. It has to do with a debt that was failed to be paid by the FNM and perhaps I’ll go as far as to say it’s an accrued bill of over $150 million.”
Davis added, “It’s an arrears of $150 million. It’s a legacy debt that is owed by BPL and we are paying $10 million a month to satisfy that. It has nothing to do with hedging. It has to do with the fuel supplied and not paid for.”
Pintard insisted the prime minister said “many false things in the House” on the BPL hedge issue and accused the government of seeking to “whitewash history”.
“The public knows that your fuel bill is higher because they failed to execute the hedge,” he said.
“That’s what the problem is. No amount of consultants can save them from that.”