Is something terrible happening in St. Kitts?
SKELEC was corporatized last year. The Government installed a Board of Directors, and instead of contracting three or four well qualified persons to manage the operation, a St. Maarten company known as COMS was contracted to manage, reportedly at the fee of EC$200,000.00 a month.
And COMS hired the four persons to do the job.
Right there, maybe as much as EC$100,000.00 a month, or more, is being overspent. That’s $1.2 million a year. That’s a lot of money.
The owner or leading figure in COMS is a man named Terry Burn. He also owns or influences a company named CaribNRG, which shares an office location and telephone number in St. Maarten with COMS. Nothing is terrible about that.
Mr. Burn is no stranger to the Government. His companies have been selling or sourcing supplies and services for the Power Station and other areas of the Electricity Department for some time.
Indeed, there is a company named ‘Power Data’, allegedly owned by his son, which some time ago installed a system to monitor the temperatures and other readings of the generators at the Power Station from the COMS/CaribNRG offices in St. Maarten. If there’s a problem, someone in St. Maarten will advise the folks in St. Kitts of it.
I’m not aware if there’s a monitoring facility here in St. Kitts, and I’m not sure that I’m comfortable with a situation like this, especially with what follows in this article.
SKELEC is said to be losing about $60,000.00-$70,000.00 a day, that’s about $2 million a month, mostly because of: (i) leakage of energy through poor transmission and distribution lines; (ii) consumers, especially large consumers, not paying for electricity (the Government is the largest); (iii) people stealing electricity; and (iv) other operational inefficiencies.
SKELEC’s budgetary exercises began earlier this year, and the budget included significant sums to help address transmission and distribution issues. It’s said that COMS wasn’t happy with the proposed budget, and that it advised SKELEC that $30 million was to be added to the Company’s projected revenue for the year, and another $30 million each year for the next five years.
The $30 million would be raised from the sale of preference shares to be issued with a 10% dividend.
Preference shares are different from ordinary shares in a company. While they usually don’t carry voting rights, if a company declares dividends, then the preference shareholders get their dividends before ordinary shareholders, and typically their dividend is at a fixed rate.
The arrangement may state that if a dividend is not paid in a particular year, the amount payable carries forward to the next year, etc. And although the payment of a dividend is an option, and not an obligation, of the Company, the arrangement may also state that if a dividend isn’t paid, it can be converted into a debt owed by the Company to the preference shareholder.
People can make deals, and on the face of it, nothing is terrible about that.
However, I don’t know who’d want to buy preference shares in a company which: (i) is fully owned by a Government that is in such massive debt and under IMF supervision; (ii) is itself showing a substantial operational loss and is tinkering nervously with the idea of increasing rates again in the hope of closing the deficit; (iii) isn’t showing great signs of collecting from its large delinquent customers, some of who are big shots who simply refuse to pay; (iv) is losing $2 million a month; and (v) is projected to catch its financial tail for some time to come.
Who’d want to buy those shares unless the preference shares are to be convertible into ordinary shares. Then in five years or less we’re told that SKELEC is unable to pay off the preference shareholder, that the preference shares will accordingly be converted into ordinary shares, and that the former preference shareholder is now the owner, or has effective control, of SKELEC.
Suppose, at that time, we’re told that the preference shareholder is Mr. Burn, or someone close to him, or any one or more of his companies, or a local big shot in the public or private sector, or a surrogate, whether human or corporate, of that big shot.
Would this be yet another effort to bar the ordinary folks of St. Kitts & Nevis from getting a piece of the corporate pie and a seat at the corporate table? Would it represent yet another reprehensible act of disempowerment of the people of this country, ‘tiefing’ their Electricity Department from them and turning them from owners to mere consumers of this essential service in this the land of their birth? And in the process a chosen few become richer and more powerful?
Is this what we, the people of this land, and our descendents, have to show for having allowed Denzil Douglas to lead us?
Is this the year 2012 A.D., or is it 1812? Wasn’t it Emancipation Day just three days ago? Or is that no longer important?
And what would the first $30 million, and the subsequent $120 million, be used for?
To buy and install ‘smart meters’, and the SKADA (Supervisory Control and Data Acquisition) system, and, later on, three (3) generators, etc., with relatively little focus on transmission and distribution, and even less on conversion to renewable energy.
Smart meters are digitally controlled and can be read, connected, disconnected, have tariffs set, etc., remotely. They would be installed on individual premises, just like the present meters are.
The SKADA is a device which monitors transmission and distribution systems on a ‘wholesale’ and island-wide basis.
Both smart meters and SKADA are very useful systems. Whether they’re ideal, or even necessary, for a place as a small as St. Kitts, I don’t know. And whether, in SKELEC’s present financial and fiscal state, and given the poor state of its transmission and distribution system, the smart meters and SKADA should receive top priority at this time, is also arguable.
But they are what Mr. Burn has apparently been pressing for. I’m told that a final decision hasn’t been made yet.
Meanwhile, if Mr. Burn is to have his way, the smart meters and the SKADFA system would be monitored from his office in St. Maarten, just as the generators at the Power Station are being already monitored from St. Maarten.
While I’m all for monitoring - it’s absolutely essential - I’m more than a little uncomfortable with the ‘command and control’ centre for our island’s power supply system to be located in a next country, and under somebody else’s control, especially with the conflict of interest questions that could be asked here.
Yet this would fit into a perverse administrative culture that seems to have taken hold in our country.
And this is cause for another concern. It’s clear that Mr. Burn’s companies, COMS and CaribNRG, already enjoy a position of great influence insofar as the purchase of materials, equipment, etc., is concerned.
If he or either of his companies is in a position to influence who gets the contracts to supply and/or install the smart meters, the SKADA, the three new generators, etc., then we can have a situation in which the winner is Mr. Burn, or his company, or even the supplier and or service provider preferred by Mr. Burn or his company, while the losers are SKELEC and the consumers and people of this country.
Suppose, for example, out of the $30 million targeted for revenue from the sale of preference shares each year, Mr. Burn or one or more of his companies were to collect $10 million, or even $5 million, or even $1 million, in commissions and/or fees.
That, for me, would be money badly spent by SKELEC.
And suppose the deal for the sale of the preference shares contained a deferred or periodic payment clause so that instead of paying the $30 million up front, the buyer could pay in installments.
It would make things even sweeter for the buyer. But it wouldn’t be good for SKELEC, for consumers, or for this country.
Mr. Burn might not even be the buyer of record. He might just be the agent to find buyers for SKELEC, and for that he might collect a handsome fee which can be paid in cash or in shares.
What we all face, if the SKELEC Board buys in, is a possible running down of SKELEC, a desperate increase in electricity rates in an effort to recoup ongoing losses, a conversion of $150 million worth of preferred shares into ordinary shares, and a takeover of the Company by Mr. Burn or whoever else, leaving the people of this land once again holding the faecal end of the stick.
Same old, same old.
Shares in the National Bank lost. Increments lost. Jobs lost. Businesses lost. Investments lost. Savings lost. Massive haircut taken. Beaches lost. Thousands of acres of land lost. Homes lost. Patrimony lost. Hope lost. And now SKELEC lost too?
I don’t know about you all, but this kind of ‘privatization’ is a little too ‘private’ for me.
We, the people, need to appreciate the value, costs and other realities of electricity and energy in this day and age, and the need to be more prudent in our use of electricity and all other economic and social resources.
We must also wean ourselves off this dependency syndrome that has gripped so many of us, because if we’re less responsible than we need to be and we keep depending on politicians and others to bail us out, then we must expect that many of them will expect something from us in return. This is a syndrome which strangles our potential and our productivity, and opens the door for people to use and abuse our intelligence and integrity and to control us, all of which makes us, shamefully, willing partners in our own degradation.
At the same time, the Government must act to ensure: (i) that we get the most efficient and progressive, and the best and the fairest, deal possible; (ii) that our best interests as consumers and as citizens are properly protected and advanced; and (iii) that the people of this land stand first in line to be empowered from the opportunities in this land.
And we must hold the Government’s feet to the fire on these things.
In order to achieve these goals, the right way to go may be to the Caribbean Development Bank (CDB), not along the route that we’re seeing here.
The CDB is said to have some highly trained, skilled and committed individuals at its disposal when it comes to projects like this, and it puts strict criteria in place to ensure transparency, efficiency and sustainability in the providing of this essential service.
All of which may be why, instead of hearing about the CDB in this process, we’re hearing about this preference share story, about all of this power that already seems to sit essentially in one man’s hands, and about the possibility of that power increasing.
Our economic and social future is at stake here. Our honour, pride, dignity and independence are on the line.
Without a proper, sustainable and affordable energy supply, and without a fair chance of empowerment in our own land, we’re finished as a people and as a nation.
And instead of charging forward into the 21st century as a nation, confident, committed, empowered and unified, we would be heading straight back to the 18th century, which seems to be what’s happening here.
I don’t like it at all.
