Rawdon Adams on the Barbados Light & Power fire sale.

Rawdi Adams says we haven’t had a real debate yet

Rawdon ‘Rawdi’ Adams is the grandson of nation-builder Grantley Adams (With Rawdi in the above photo… look at the eyes! the chin, the nose, the smile!) and the son of our second Prime Minister Tom Adams. Rawdi has much to say about Barbados and Bajan politics these days.

Will he be returning home anytime soon? In light of the disastrous split in the current BLP leadership that question has been coming up lately at a few rum shops. Never say never, you know!

Rawdi published an opinion piece at The Barbados Advocate and we’re going to repeat it in full here. You really should go to the Advocate to read it, but given that paper’s history of erasing the truth and their archives we’re going to leave the whole article up here for the record.

But please, visit the Barbados Advocate to read the piece and then leave your comment here if you desire.

Thoughts on the BL&P offer

by Rawdon Adams

1/7/2011

Come January 24, Barbados Light & Power Holdings (BL&P) is set to pass into foreign hands.

In an era when some nations block foreign takeovers of even yogurt makers on the grounds that they are “strategic assets” (as France did when Pepsi wooed Danone in 2005) it is surprising to see the truly strategic BL&P up for sale to a foreign buyer with so little reaction from the Barbados Government. It does, after all, control nearly one quarter of the company’s equity via the National Insurance Scheme (NIS).

This is not an ideological position (as was the case with the strategic yogurt). Nor is it a chauvinistic one – BL&P is a utility which has already spent long periods under Canadian control. Rather, it is about voluntarily relinquishing, or potentially relinquishing in the absence of safeguards, powers to optimally balance public good against private, monopolistic enterprise in the furtherance of national development.

Indeed, how Barbadians came to majority ownership of the utility in 1980 is principally a story of government investment in a private company for the purpose of national development. That kind of control was necessary to deliver a net public benefit – and who is to say it will not be needed again?

As Canadians recognised last year when blocking the takeover of Potash Corporation by BHP Billiton as not in the country’s interest some assets require persistently heavy, taxpayer-funded capital investments over many years before emerging (perhaps) economic, or “strategic” or of net public benefit. Potash exploitation fits that bill. As does building long-term energy infrastructure. Stepping in once the costs have been sunk is an understandably attractive option for buyers.

Still, the offer does seem generous – the local bourse prices BL&P at less than $13 per share and Emera is ready to pay $25.70 per share.

There are only two ways to value a company: either on a fundamental basis, by toting up its assets and taking away its liabilities to arrive at its net asset value (NAV); or on a relative basis – that is, compared to similar (or alternative in this case) investments. Everything else is negotiation.

If one were to build a BL&P from scratch, not only would it take years, it would also cost over $36 per actual BL&P share as per the aforementioned NAV calculation. $36.26 to be exact – and it is against this number that the $25.70 must be measured.

Local investors were obliged until now to consider the merits of BL&P on a relative basis. For most this means comparing the dividend yield relative to others on offer locally. There was little point in looking at net assets for there has not, pre-Emera, been an interested buyer rich enough to realise anything near the replacement cost of a small-island, monopoly utility with limited growth opportunities.

The Government, on the other hand, is not obliged to consider the value of its investments in either way: it must consider more than the impressive 30% discount to NAV Emera is asking against full control; more, too, than the windfall for the NIS. The primordial issue is in fact whether the state is about to subcontract out some of its fate that it had hitherto been crafting itself.

In another age a government of the ascendants of the French yogurt makers above was described as having forgotten nothing and learnt nothing – ultimately to its cost. Let history instruct in this New Year. Perhaps this transaction is truly of net public benefit. But at least have a parliamentary and national debate worthy of the name.

Rawdon Adams

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15 Comments

Filed under Barbados, Consumer Issues, Economy, Energy, Politics

15 responses to “Rawdon Adams on the Barbados Light & Power fire sale.

  1. Good God!

    A man who is articulate with a lot of common sense!

    Come home immediately with an operational plan and a you will have almost immediate support.

  2. The man wiv no name!!

    Is he light-skin?!! wha den he boung to succeed!! even today, Bajees still full uh ****!! I know ull delete this 1 BF!!

  3. BFP

    Hi TMWNN

    We were thinking of modifying the article to point out that Rawdi’s skin might be too light to succeed in Bajan politics. What do you think?

  4. what will they think of next

    At last, an Adams with sense.

  5. what will they think of next

    If he runs for the DLP, “Good God!”

  6. The man wiv no name!!

    BF, n why would u want to circumvent d truf. once brown-skins tink duh got at lease 1% uh white blood in dum, look out! duh tink dat duh white n d blacks, too, tink dat d browns n d whites more intelligent dan dem anyway, so, whichever way yuh look at it, he on a winning pitch!! My advice to he would be, if dah is wuh he really interested in, tuh ‘go for it bro’! In racis Buhbadus yuh caan fail but win!

  7. peter loveridge

    I just hope Emera gives you better service than they give us, highest electricity prices in Canada, and not a week goes by in the winter without tens ( or hundreds)of thousands of customers being without power, sometimes for days ( or weeks)

  8. Adrian Loveridge

    Monthly Bill 750 KWh
    Halifax CAD$99.37

    Vancouver $55.10
    Winnipeg $54.70
    Montreal $53.07

    Source: Manitoba Hydro 2009

  9. Emera lays off workers http://bit.ly/h3uCAzAtlantic Canada’s largest supplier of trade workers who build, maintain and operate power projects is temporarily laying off 78 employees, it confirmed Friday.

    Emera Utility Services of Lakeside is blaming the layoffs on the completion of several renewable energy projects at the end of 2010, including Nova Scotia Power’s Digby wind farm and the Glen Dhu wind farm in Pictou County, spearheaded by Shear Wind Inc. of Bedford.

    Emera Utility Services, an affiliate of NSP’s parent company Emera Inc., employs 300 workers in Nova Scotia and New Brunswick and has been in business for 10 years.

  10. Mobert

    Very good summary by future PM R. Adams.

  11. watcher

    Control likley rests with these people anyway..they own a very big chunk of it. Best to get the money, the technology of wind and tide, and then nationalize the dam thing or get Clico to take it over.

  12. Worst Caribbean

    He too white. We like dem daaark!
    Dah way dum cud do bare shyte, an iz allright.

  13. HM

    Is he good for the ordinary people of Barbados? That is what should matter, not who his grandfather was or how dark he is.

    As for selling off utility (and other companies) this was done in the UK years ago. Break up the monopolies they said, etc. etc.

    Well the other Europeans, including the French have bought lot of these companies. When they put up energy (or other) prices, they rise massively in the UK and by a smaller amount in their home countries. Now I wonder why that is………………….

  14. In this great pattern of things you’ll get a B- for effort and hard work. Where you lost me personally was first on your specifics. As as the maxim goes, the devil is in the details… And it couldn’t be more true in this article. Having said that, let me inform you precisely what did give good results. Your writing is certainly quite persuasive which is probably why I am taking the effort in order to comment. I do not really make it a regular habit of doing that. 2nd, while I can easily notice the leaps in reasoning you make, I am not sure of exactly how you seem to connect the ideas that produce your conclusion. For the moment I will, no doubt yield to your point but trust in the near future you actually connect your facts much better.

  15. Yatinkiteasy

    BPF a lot of trollers around tonight!