The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A $700 million power plant proposal aims to slash BEC’s existing fuel charge by up to 75 per cent, and eliminate the more than-$20 million it spends annually on ‘waste sludge’.

Taylor Cheek, principal behind the Caribbean Power Partners project, told Tribune Business that around 7 per cent of BEC’s annual fuel bill was ‘unusable’ because of the heat it needed to produce in power generation.

As a result, this proportion of BEC’s Bunker C fuel bill automatically became waste sludge that had to be disposed of. And, given that BEC’s fuel imports typically exceed $300 million annually, Mr Cheek said at least $21 million of this sum was going to waste.

He explained that Caribbean Power Partners’ proposal, which aims to construct/own/operate a 300 Mega Watt (MW) generation plant that will meet all New Providence’s energy needs, would eliminate such fuel wastage through its ability to use multiple different fuels - largely liquefied natural gas (LNG) and/or propane.

Through the use of more efficient, environmentally-friendly fuels, coupled with reduced maintenance costs, Caribbean Power Partners is aiming to reduce its energy (fuel charge) to as low as $0.07 cents per kilowatt hour (KwH) - some 75 per cent lower than BEC’s current equivalent.

And with a proposed Capacity Charge (the equivalent of BEC’s base tariff rate) of just $0.10 per KwH, the Caribbean Power Partners consortium believes it can achieve a 33 per cent cut to the $0.15 per KwH currently charged to residential consumers.

The ‘bottom line’ is that the group is planning to sell power to BEC at $0.17 per KwH, a price it says is “more than 60 per cent less” what the state-owned power monopoly currently charges Bahamian consumers.

“We’re setting our price up in two components,” Mr Cheek told Tribune Business. “The first is Capacity, similar to the demand charge on your bill, which covers debt service, insurance, operating costs and profit.

“We guarantee it and fix it for the life of the contract (25 years). We also guarantee the heat rate.”

As for the Fuel Charge, Mr Cheek said Caribbean Power Partners was pro-posing a ‘partnership’ with the Government where both sides met annually to review the plant’s fuel costs.

Using latest market data on either LNG or propane prices, depending on which was in use, Mr Cheek said the two sides could either decide to base fuel prices on the prevailing ‘spot rate’ or hedge it.

The latter, which involves setting a pre-determined price at which fuel supplies will be bought several months later, would help eliminate volatility and marked price increases that are inevitably - at the moment - passed on to Bahamian businesses and households.

“Nobody can guarantee what the cost of fuel is, but we can guarantee the efficiency of the plant and capital side of it,” Mr Cheek told Tribune Business.

He added that Caribbean Power Partners’ plant would generate immediate savings by being 30 per cent more fuel efficient than BEC’s current generation capacity.

Likening power plant ‘heat rates’ to a car’s ‘miles per gallon’, Mr Cheek said efficiency in this area was determined by how many British Thermal Units (BTUs) were required to generate every kilowatt of electricity.

He said BEC’s average ‘heat rate’ was 10,000 BTUs, but system wide - across all its power plants on various islands - this varied between 8,200 to 18,000 BTUs.

Caribbean Power Partners is guaranteeing a 7,000 BTU heat rate, and Mr Cheek told Tribune Business: “No matter what we’re burning, we’re burning 30 per cent less than the current system, and fuel is the highest cost of production.”

The group’s project proposal adds: “In our financial model comparative analyses, one unit of heat rate in terms of BTU per KwH will burn an additional $250,000 of current BEC fuel annually.

“We have examined all of BEC’s 2012 fuel consumption data, and have observed that high heat rate is a primary deficiency of the current operating system.

“Of special mention are the rental units, which by lack of efficiency burn at a documented energy consumption of $0.25 per KwH.” This fuel charge, Caribbean Power Partners added, was higher than their combined selling price of $017 per KwH.

Mr Cheek added that BEC’s reliance on Bunker C fuel meant it incurred high maintenance costs, and said: “Reciprocating slow speed diesel engines are very costly to maintain.”

Caribbean Power Partners’ project proposal emphasises this, saying: “These high fuel costs are a direct negative effect and burden to BEC customers.

“We are of the view that the best way forward for BEC is to eliminate the use of Bunker C and diesel, and to eliminate the process of costly maintenance associated with diesel engines.”

BEC’s New Providence plant maintenance costs would be eliminated if Caribbean Power Partners’ proposal supplied all the island’s generation needs.

By eliminating Bunker C, and switching to either LNG or propane, the consortium said its proposal would end existing BEC expenditure on lube oil, estimated at $15 million per annum.

Also eliminated will be foreign maintenance contracts, rental unit hires and excessive overtime estimated to cost BEC over $10 million per annum.

Caribbean Power Partners said it would use a General Electric (GE) lease programme that would cut turbine maintenance down to five days, compared to BEC’s current 30-90 day unit downtime.

Suggesting that their proposal would also help solve the reliability and consistency of energy supply, Mr Cheek said: “We can make it much more reliable.

“For normal maintenance, we will have one or two turbines spare on-site. As we pull the old one out, we pull the new one in.”

And, when it came to emergency maintenance and spare parts, Mr Cheek said ProEnergy Services, a key part of the Caribbean Power Partners consortium, had its own turbine overhaul and parts manufacturing facilities.

The group’s proposed 700 MW plant will employ aeroderivative gas turbines, which Mr Cheek said were well-suited to easy maintenance.

He explained that components could quickly be replaced, and technology advances meant that the plant would likely be more efficient, with improved operations, in the 25th year - when it was handed over to the Government - than from day one.

“The Bahamas hasn’t been in a position to take advantage of larger gas turbines where you get quantum leaps in efficiency gains,” Mr Cheek told Tribune Business.

“Once you hit about 40 MW, you get a big jump in efficiency, and everything we’re putting in is a little over 40 MW.”

He added that Caribbean Power Partners was designing the plant with four combined cycle gas turbines, and two simple cycle ones. The former captured the heat produced via the generation process, using it to create more electricity.

Explaining that the plant could easily be expanded to meet New Providence’s increasing energy demands, Mr Cheek said the consortium would initially convert one of its simple cycle units to the combined variety.

“The whole system has got more efficiency, more output,” Mr Cheek said. “We can continue to grow and match the system as we go.”

He added that Caribbean Power Partners’ proposal was effectively a ‘one-time’ solution to New Providence’s energy needs, reducing energy costs while simultaneously modernising the generation plant and improving its reliability.

The traditional approach had been to add on generation capacity when it was needed in an ‘ad hoc’ manner, but Mr Cheek told Tribune Business: “It’s unfair to come in and just say BEC hasn’t done this the right way.

“If you look at how generation has been added over the years, BEC has been in a position where if it’s needed 15-20 MW it buys a reciprocating slow speed diesel engine.

“That makes sense going along with that. What we did was come along and say: ‘The system in general, the generation plant in general, is pretty worn out’,” he added.

“A lot of it is equipment, and budget constraints have resulted in the putting off of maintenance work that should be done.”

BEC’s heavy multi-million dollar losses in recent years, couple with a stretched balance sheet, mean it simply does not have the wherewithal to finance what Caribbean Power Partners is offering.

Mr Cheek told Tribune Business that the consortium was offering “a clean slate” to “build a modern, efficient gas turbine power plant that’s way beyond anything BEC has looked at.

“It’s hard for BEC to take the assets they have, to justify what they have and scrape together a new plant.”

Mr Cheek added that Fluor Corporation, which will construct the proposed plant via a ‘turnkey’ solution, would “guarantee” the price and construction schedule.

The company, which is part of the consortium, would “put up its balance sheet to the full value of the plant”. This, Mr Cheek said, meant cost overruns would not become a liability for the Government or Bahamian people.

Mr Cheek said Fluor had built a power plant and LNG facility in the Dominican Republic, and completed “most if not all the power work” in Trinidad & Tobago.

He added that the company also had experience in the Bahamas, having constructed back-up generation capacity for Atlantis and Exuma’s Emerald Bay resort.

Fluor’s generation procurement manager from the Atlantis Phase II expansion will take the same post with the Caribbean Power Partners project.