Obtaining as much as $150 million in financing, juggling staffing issues and building and siting what could be a $300-million new infrastructure to feed Belco’s power plant are some of the hurdles in front of Bermuda’s electricity company.

Belco must figure out where a new Liquefied Natural Gas (LNG) storage terminal can be built and how they can convert existing facilities to burn gas instead of petroleum.

But they must also make arrangements in the US to purchase the LNG, and use newly-built or leased ships to get the product to the Island.

Walter M. Higgins, President and CEO of Belco parent company, Ascendant Group Limited, said, “The ownership of the storage is by no means settled, either. It’s not that it’s a problem, but in order to have the utility invest less money, the odds are we will have a partner — whether it’s a terminal operator or somebody else involved in the building and ownership of a storage terminal.

“That means we raise less money and the partner has to raise some money ... and that helps spread the cost.

“But at the end of the day, if the terminal costs $300 million, you have to create enough revenue to service a $300-million investment.

“Maybe the partner raises most of it and we raise the money to convert the power plants and other things.”

Mr. Higgins believes the current environment is ripe for borrowing and the utility has a large capacity to borrow money, because of its lack of debt.

He said, “That is very unusual. Most utilities are about half debt and half equity. We have no debt. So we can borrow $100 million to $200 million, depending on do we have a deal with the government about how we are going to recover the costs of these investments.

“If we can make that deal, we’ll be able to borrow the money and that will be about $100 million to $150 million.”

Urgency over the existing state of the plant has been tempered by the economic downturn, with fewer occupied commercial and residential premises, leading to lower demand on the engines.

But the older engines are also more expensive to maintain and require more fuel oil to operate. There are plans to refurbish existing facilities.

The company obtained government relief from Bermuda’s 60/40 ownership rules in 2011, freeing them from the restriction of 60 percent shareholding by local interests.

Mr. Higgins said, “It was to ensure that when we need to go to the equity markets to raise more equity capital we would be able to get it, because it is not clear that there is equity money in Bermuda that would want to invest in this.

“Secondly, we haven’t seen a lot change in the demographics of our shareholders since we obtained relief. We’re still less than 40 percent foreign-owned, even though we were about 38 percent when we got the relief and now we are about 39 percent. So you’re not seeing a whole lot of turnover in who owns the company. There have been some sales because with poor results and less sales the stock price diminishes.

“Some of the current shareholders have an appetite for the shares since they are trading at about $7 a share when they are worth $30 a share if the company was liquidated.”

Mr. Higgins was asked if the company should have begun redevelopment some years ago. But just two years into his tenure, he conceded he didn’t know all the details of past decisions.

He said, “As I understand it, the company made a very honest attempt about five years ago to build a consensus and get planning and regulatory approval to invest in some replacement engines. They got Planning approval, but they got turned down on what was needed to pay for the engines.

“That was the decision made by the Energy Commission, probably in light of the economic challenges the Island was facing and the fact that company was asking for an increase in rates in order to pay for the new engines.

“They could have easily felt that with declining sales and reducing peak demand, the company didn’t really need new engine replacements.

“I don’t blame the Commission. Their job is to decide what is fair for Bermuda. I think they are good people.

“This is a public service company that operates within a very special relationship with its customers and with the government and the people of Bermuda. In exchange for the right to serve all the customers of Bermuda with electricity and make money doing it, we agreed that our rates can be subject to review and approval by the government. That’s the deal if you are a utility.”

The redevelopment planned at Ascendant’s main units will mean there will be different staffing solutions required. But the company seems intent on making it as painless as possible, by taking advantage of retraining and staff reduction by attrition.

Mr. Higgins confirmed, “I would say on average it will take fewer people to run the newer technology. But some people can undergo training to fill related jobs. And as people retire, we will replace fewer people, as new equipment comes on line.

“There will be lots of skilled and unskilled jobs that will be created for the LNG terminal and a new pipeline to carry natural gas from the terminal to the power plants.

“So there should be a lot of construction over maybe five years, plus the solar installations over 10 years.”