Accountant and head of the local corporate shareholders group Douglas Skeete expressed surprise in the news today at his findings after he did a quick and simple analysis of Barbados Light & Power (BL&P) balance sheet to determine the book value of its shares. One would have thought given his role as an Intervenor in the recent Fair Trading Commission (FTC) BL&P Hearing he would have been more than intimate with the disparity in BL&P’s book value per share and share price. After several days of discussion, the public is now being made aware by local commentators that simple analysis shows that the book value of BL&P shares maybe easily located in the $40-$50 range. We have been told the results of a study will be made public shortly to more accurately determine BL&P’s book value per share. The offer of $25.00 by Emera against the foregoing should now make for more interesting discussion.
On the 21 December the BU family would have been apprised by a source of the revelation which Douglas Skeete announced today:
BL&P, at $12.50/share, is valued on the BSE at $BDS 214m. At $BDS 25/share Emera are suggesting BL&P the company is actually worth $BDS 428m. Why this apparently generous price? Take a look at the 2009 BL&P’s accounts. Net asset value (ie all its assets minus all its liabilities) is sitting around $BDS 620M. Or something north of $BDS36/ share.
So on the face of it Emera are asking for a 30% discount on the intrinsic worth of the company. Course, some risk must be factored in – political (inc regulatory) for example – but Emera may actually be removing the other risk associated with current limited liquidity. Once wrapped up in the Canadian balance sheet any eventual resale ought to be greased by the higher liquidity an easier-to-sell structure offers.
The second point made by Douglas Skeete today in the news was to refute Rawdon Adams’ claim that BL&P is a national strategic asset. BU may not be able to offer a position with the eloquence of Rawdon Adams supported by the financial know how of Douglas Skeete but we pride ourselves on using heavy doses of commonsense. A government can deem any asset in the country to be strategic based on its strategic thinking or plan. At a critical juncture in our history where the push is on by the government to build out alternative energy programs, BL&P as the monopoly for power generation and distribution in Barbados must be seen as a strategic asset. Whether it is believed by Skeete and others that Emera can do the job becomes moot.
The final point raised in the news today was the questioning by Malcom Gibbs-Taitt of the role of Sir Neville Nicholls as Chairman of the Fair Trading Commission and Barbados Securities Commission. Douglas Skeete was quick to offer the position that to question the capacity of Sir Neville to deliver a professional decision in both capacities is wrong. BU begs to differ. BU believes Sir Neville’s refusal and the authorities to recognize that a clear conflict of interest exist in his continued roles as Chairman of the FTC and BSC is an insult to Barbadians. Here is how Wikipedia defines Conflict of Interest:
A conflict of interest (COI) occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other.
The emphasis on the word possibly is BU’s.
Barbadians will be observing closely how government decides on its NIS share holding in BL&P. The fact that Emera sent home 78 workers last week Friday maybe of passing concern to the management of BL&P.