Government plans to privatise Electricity Corp.

Government has accepted a proposal from a global competitive energy 
company, Mirant Americas Inc., formally Southern Energy, to assist with 
improving electricity service in the British Virgin Islands, it was 
announced here last Thursday.

Minister of Communications and Works the Honourable Julian Fraser made the announcement during the first of a series of scheduled press conferences. 

He had also promised to provide details at this time, when questioned 
during the last sitting of the Legislative Council.
Hon. Fraser announced that representatives of Mirant made a presentation to the Elected Members of government during the week of August 26th, 2001. He said by letter dated November 8th, 2001, Mirant wrote the government with an attached proposal which would authorize Mirant to perform feasibility studies and analyses regarding the BVI Electricity Corporation for a period of 90 days beginning on a date set forth.

Mirant has extensive operations in North America, Europe and Asia and is 
also well established in the Caribbean, in the Bahamas, Trinidad and 
Tobago, Jamaica, Curacao and Puerto Rico. They acquire, develop, construct, own and operate power plants and distribution systems, sell wholesale electricity, natural gas and other energy commodities.

“Mirant intends to use the results of the studies and analyses to prepare a 
proposal for a partnership or joint venture between the BVI Electricity 
Corporation and Mirant,” the Minister explained. He said during the 90-day 
period, government was to ensure that certain programmes and plans were in place to ensure that Mirant was able to function efficiently.
Mirant’s terms of reference include performing financial, technical, 
environment and business due diligence of BVIEC; preparing a valuation 
model of BVIEC; preparing the term sheet for government, which in the event of an agreement would become the basis of a full contract between both parties; paying all of Mirant’s expenses; reimbursing the government and BVIEC for reasonable expenses incurred during the 90-day period not 
exceeding $20,000 with the express written consent of Mirant and 
negotiating in good faith with government to produce a term sheet 
acceptable to both parties.

“The government, after careful consideration, by letter dated February 6th, 
2002, accepted the proposal received from Mirant, with few modification,” 
Hon. Fraser told reporters on Thursday July 4th.

He however explained that a decision has not been reached with Mirant to 
take over the BVI Electricity Corporation. “This thing is so far away from 
any decision, it’s so much in its embryonic stage…They have merely 
expressed an interest in doing business with us…We have to look at all the 
different things that they have in their minds and we have to look at the 
difficulties that we now face.”

He said if the government decides to proceed further with Mirant’s 
proposal, it would “most likely” be approved by the Legislative Council. He 
said the people therefore would eventually decide whether the Corporation 
would be privatized.

During the press conference, the Minister of Communications and Works also addressed the issue of approval granted on August 17th, 2001 by Executive Council for the BVIEC to borrow $5,000,000 from Scotia Bank BVI Ltd., for the procurement of a generator as a supplement to the original loan agreement of $19,933,600. Approval for the right to borrow was also granted by the Legislative Council on November 15th, 2001.

According to the Minister, ExCo, in the same decision of August 17th, 2001, decided that government, by advance warrant, issue to the BVIEC $5M and that upon receipt of the loan from Scotia Bank, it shall repay government within 30 days the said amount. He said Executive Council further stated that the money being loaned to the Corporation was conditional upon the Corporation having an operational audit being carried out to determine its viability.

“Let me report to you that the Corporation is yet to receive that loan of 
$5M from Scotia Bank BVI Ltd.; needless to say, the Corporation has not 
paid back to government the advance payment,” Hon. Fraser revealed. It is 
understood that the BVI has not secured approval from London’s Foreign and Commonwealth Office to borrow the money.

In terms of the operational audit, he said that was also never carried out.
“The point is, that we do not know what the Corporation’s true value is, 
without the audit,” the Minister continued. “What we do know however is 
that the Corporation’s most recent adventure has landed it a $24,933,600 
debt for the purchase of three generators, which are well documented failures.”