Still looking For a Winner
As President Zelaya dismisses a previously agreed on RECO bid procedure, the process loses transparency

January 1st, 2008
by Thomas Tomczyk

[private]

A RECO customer in front of the Los Fuertes generating plant.

A RECO customer in front of the Los Fuertes generating plant.

Naming “doubt and discrepancy in the evaluation process,” President Zelaya has annulled the proscribed selection process, and named a new presidential commission to decide who will be awarded the purchase of a controlling share of RECO stock. “The transparency was lost,” said Charles George, a member of the technical evaluation committee. “RECO became a political issue and then an economical issue,” said Evans McNab, president of RECO board.

President Mel Zelaya, who was seen by some as a rescuer of people of Roatan for relieving them of the perceived “RECO board mismanagement,” has taken the decision about RECO’s future from Roatan to Tegucigalpa. On December 4, the president announced a six member presidential commission presided over by Aristides Mejia, minister of defense. No representative of RECO board was invited to the commission.

As the control of destiny of Roatan’s most important company slipped out of islanders’ hands, a sense of urgency permeated RECO board members and local politicians. On December 5 they sent out a letter asking President Zelaya that the fate of the 52% RECO stock be decided by RECO general assembly.

On December 11, a CANATURH meeting in French Harbour discussed the process of RECO bid award. In a rare, perhaps first, sign of unity, the president of patronatos and RECO board members actually agreed on an issue: supporting Kelcy Warren’s bid for 52% RECO buy-out. “Kelcy Warren was the only one that came to us and let us know that we will be able to submit ideas to him,” said Steven Guillen, a RECO board member.

As a bid prerequisite, all past due debt, owed mainly to ENEE and Banco Atlantida, had to be paid off outright. “ENEE wants to get paid and get out of there,” said George. The way the bid was written, using nebulous terms as “adequate” and “apt”, allowed for different interpretation of the bid requirements. The offer for solicitation document did not offer a complete set of criteria and the evaluation commission had to actually interpret what the bid actually required. “Criteria was flawed or not well developed prior to the process,” said George.

One of the major dangers of selling the company to a bidder is the lack of evaluating their past commercial success. “The performance bond [of 15% RECO capital] is too small relative to the investment,” said George, “anyone with access to financing of several million dollars can buy the company, but what then?” According to George, many bidders seemed not to understand the technical conditions of RECO and the financial offers were all over the page.

A nine person committee composed of five ENEE representatives, and four Roatan representatives: Giovanni Silvestri (RECO board), Andres Cardona (BI Chamber of Commerce), Charles George (Chamber of Tourism) and Rosa Hendrix (Patonatos). “The process itself was very good, [but] a lot of people were counting on us to do something that was beyond the parameter of our role,” said George.

While Giovanni Silvestri and Rosa Hendrix, members of the financial evaluation committee, refused to sign the document, the technical evaluation commission had chosen three companies with the highest point score: Punta Cana Macao, Kelcy Warren and Freddy Nasser’s Terra Group. “the other two bidders were not considered valid options,” said George.

The RECO board and many Roatanians in general are afraid the decision might choose a company with a poor management record and little will to invest in proper, long term development of the company’s infrastructure and generating capacity. “There are sharks out there that will hike tariffs and achieve efficiency that way,” said McNab. “Government can recommend [who will win the bid] but RECO assembly will decide.”

Things are not so simple. ENEE holds the key portion of RECO debt and “ENEE can prosecute RECO for lack of debt payment and have it declared bankrupt,” said Romeo Silvestri, president of CANATURH- BI. A showdown between ENEE and the private owners of RECO looks more and more likely. With the Christmas tourist season around the corner and the Semana Santa holiday spike coming in mid March, time is not on the side of the RECO customers or the company’s board of directors.

According to George, RECO’s monthly operating capital is around Lps. 28 million with a deficit of Lps. 7 million paid monthly by ENEE. The value of the company lies in its monopoly status and growth potential: an estimated 18% yearly growth for the next five years. That would mean a maximum demand of 22 Megawatts by 2012, with the need to have a 30 Megawatt capacity for reliability. Currently RECO has a peak capacity of 12.2 Megawatts, mostly coming from rental power units. [/private]

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