Belize dannys Fortis

Almost three years after Danny Williams’s Conservative administration in Newfoundland and Labrador expropriated Fortis’ electricity assets in the province, the government of Belize has taken a leaf from Williams’ playbook and seized Fortis’ interest in Belize Electric Limited.

Fortis held a 70% interest in the company at the time of the seizure.

Compensation for the expropriation has yet to be determined.

In related news, Standard & Poor’s is warning the Belize government that it may downgrade the country’s credit rating in the wake of the move.  According to Reuters:

"The final details of the acquisition and its impact on the government's debt burden and fiscal flexibility are uncertain. However, based on the information currently available, we believe that there is significant likelihood that we could lower the ratings to 'B-minus' upon the conclusion of this transaction," S&P said.

In its statement, S&P said Belize's general government debt as a portion of gross domestic product is already a high 85 percent, with the interest burden around 15 percent of its revenues.

“The proposed bill would allow the government to take over Fortis's share, with an estimated book value of $100 million," S&P said, which noted Fortis holds 70 percent of the company's equity.

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Belize wants to buy out Fortis interest in Belize power company

From Fortis:

“The Government of Belize (the "Government") issued a media release on Friday, June 10, 2011 announcing the Government's interest, "...in purchasing majority shares in BEL so as to assume control of the company." No purchase proposal has been received by Fortis Inc. ("Fortis" or the "Corporation") (TSX:FTS).

Fortis holds an approximate 70% ownership interest in BEL, an integrated electric utility and the principal distributor in Belize, Central America, following investment at the invitation of the Government in 1999. In addition to its investment in BEL, Fortis owns Belize Electric Company Limited ("BECOL"), a non-regulated hydroelectric generation business that operates three hydroelectric generating facilities in Belize.

In June 2008 the Public Utilities Commission of Belize ("PUC") issued a rate order that has had a significant negative impact on the financial condition and operations of BEL. The order effectively disallowed the recovery of previously incurred fuel and purchased power costs in customer rates and set customer rates at a level that does not allow BEL to earn a fair and reasonable return. BEL appealed the PUC rate order to the Supreme Court of Belize. On March 15, 2011, the court rendered its judgment dismissing BEL's application and finding that, among other things, the generally accepted concept of Good Utility Practice is not applicable in Belize. BEL has appealed this judgment to the Court of Appeal of Belize; however, a hearing is not expected until the first quarter of 2012. On May 16, 2011, the Supreme Court of Belize granted BEL's application to enjoin the PUC from engaging in any rate making proceedings or taking any enforcement or penal actions against BEL pending the appeal of its judgment. BEL has been in default of covenants under its long-term lending agreements since 2008 and has had no access to credit during this period.

As at March 31, 2011, the assets of BEL represented less than 2% of the total assets of Fortis; the combined assets of BEL and BECOL represented approximately 3% of the total assets of Fortis.”

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