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
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.