The Barbados Light and Power Company (BLPC) told the utility regulator hearing its request for a rate hike that it was prudent to pay some $100 million in dividends to the Canadian owner of the business seven years ago.
That was the testimony of the sole witness of the BLPC, Managing Director Roger Blackman who gave evidence today before the Fair Trading Commission (FTC).
Blackman said transferring the money from the company’s self-insurance fund – which had too much money – to new owner Emera Caribbean was to allow BLPC to better manage its capital structure.
However, intervenor David Simpson, who has teamed up with attorney Tricia Watson who specialises in utility regulation, asked Blackman if consideration had been given to the operational needs and capacity of the company prior to paying out that sum as a refund or a return to the single shareholder.
In his cross-examination, Simpson further questioned whether a smaller amount could not have been paid to make it easier for BLPC to meet obligations to upgrades during that period.
“I believe those considerations would have been made at that time,” Blackman replied. “In fact, that was seven years ago and so you are here seven years later, so that speaks for itself…. Business was able to be managed over the last seven years since that transaction.”
He also testified that in 2021, the company paid out $25 million in dividends at a time when $70 million should have been granted.
The BLPC boss also said while the company does not have a formal dividend policy, there are some criteria that govern dividends and decisions surrounding how they are paid.
“Those are three-fold. One is insolvency of the business, the ability to pay; and another is the prevailing economic conditions at the time; and the third would be seeking to manage our capital structure as a business,” Blackman stated.
He said while the returns that are approved dictated a certain level of dividends to the shareholder, none was paid that year.
“So, the level of uncertainty that existed at that time as a result of COVID and the circumstances – the prevailing economic circumstances – would have influenced the decision to not pay a dividend, even though not paying a dividend at that time resulted in the business moving further away from the approved capital structure that was approved at the last rate case of 65-35 per cent equity,” he declared in response to a question by Simpson.
Earlier, the commission dismissed two motions brought before it by the Watson-Simpson team.
One motion called on the FTC to suspend the hearing for the BLPC to adjust its depreciation policy and rates used in the application for a rate review, to reflect the commission’s decisions and orders issued on February 25, 2009.
That motion also sought to have the company file an amended depreciation schedule and adjust other calculated values that depend on the said policy and rates.
The two intervenors also wanted those aspects of the depreciation application denied by the FTC to be deleted and that no reference be made to them during the hearing by the company.
They had also asked the Commission to order the company to remove any reference to the draft operational licences which had already been deemed irrelevant to the hearing.
The hearing continues on Tuesday at 9 a.m. when Blackman will be further cross-examined.