S.S.B. injects $15 Million in B.E.L.

The Social Security Investment Committee, last Friday, approved a substantial investment to Belize Electricity Limited. The investment of fifteen million dollars got the nod to rescue the government owned utility company which experienced a two million dollar loss in the first quarter of this year. When the government took over the company from Fortis, it was, according to the government, losing money and at the time it was accused of bad management. But B.E.L. has remained unprofitable and at the AGM this year, earnings were down and dividends were not paid.  Despite declining earnings, in February the P.U.C. approved a reduction in electricity rates. B.E.L. says it is challenged by the high cost of power and that the company’s cash flow is under strain and it therefore needs to access funding.  The company is purchasing power from CFE in Mexico at an average cost of forty-two point nine cents per kilowatt hour. While S.S.B. has excess liquidity, is it a risky investment of the people’s money? A prospectus of its offering is to go public later this month, but this afternoon both the Chairman of the S.S.B., Doug Singh and the Chairman of the Investment Committee, Net Vasquez, defended the investment.

Dough Singh, Chairman, S.S.B.

“B.E.L., as you may be aware, has always solicited invitation for the purchase of its debentures. It has four series of outstanding debentures—series one through four. Series one is about to mature; that will mature sometime around the early part or the mid part of December. In those series one debenture, B.E.L. seeks to refinance those debentures and that is one part of its invitation. B.E.L. has gone beyond that when it comes to debentures and debentures is essentially a note that they are asking people to take; it’s borrowings—they are inviting people to lend to B.E.L. they are increasing that debenture from seventeen million dollars to twenty-five million dollars. So they’ve increased the amount of monies they seek to borrow from the public. In addition to that, B.E.L. is offering five million shares of preferred shares. It’s a class of shares that has a guaranteed return of five percent and it has a life of three years after which time, B.E.L. will repurchase those debentures. So to a great extent it is a debt instrument. B.E.L. is offering as security for those preferred shares real estate that it currently holds. And some of the real estate that is currently held as security for other loans that it currently has.  So just to make it absolutely clear and with respect to a headline that I saw, it is not unusual for B.E.L. to use its asset as security. In fact it has used the very assets that it is currently pledging as security for some of the instruments it is offering; it has used such in the past. The debentures will be five million dollars. The preferred shares is five million shares at two dollars par which is a total of ten million dollars which will be a cumulative total of fifteen million dollars.”

Net Vasquez

Net Vasquez, Chairman, Investment Committee, S.S.B.

“I have a paper that says we have over one hundred and fifty million dollars. That’s how liquid we are. And he made some good points that that money had been earning less and less over years because the banks actually refuse to take your money. You make a profit for the month; take it there and they don’t want it. And what we already have there, they roll over but at a lower percent every time. So for that reason when a golden opportunity like this comes up, we have to appreciate that and we have to say well our luck is changing. This will be a solid investment, a golden opportunity for Social Security Board where we have money that is earning one and a quarter percent and two percent. We have about twenty-six million of that money. It is easy for us to take fifteen million dollars and get seven percent on the debentures and get five percent on the preference shares. I mean that is a golden opportunity. And knowing that B.E.L. is a strong company, is a monopoly, it cannot fail. It cannot fail because this government or no government would allow it to fail; it is an essential service. So it is with great confidence that the investment committee recommended to the main board, yes this is a good break we are getting; consider it; look at it.”

Dough Singh

“B.E.L. has also said that part of the funds raised is to extinguish some of its debt to customers. You may recall that there was a ruling by the P.U.C. that said B.E.L. had overcharged its customers because the rate that they should have been charging should have been less and B.E.L. has to refund those customers the funds. Well B.E.L. via this kind of financing will be able to benefit its customers by way of delivering on the P.U.C.’s ruling.”