The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The power plant joint venture involving FOCOL Holdings and Grand Bahama Power Company’s majority shareholder has decided not to enter the Bahamas Electricity Corporation (BEC) bidding process, it was confirmed yesterday.

Franklyn Wilson, the largest shareholder in BISX-listed FOCOL, told Tribune Business that the consortium had decided to remain outside the BEC process but continue to offer their proposed 100 Mega Watt (MW) power plant as an Independent Power Producer (IPP).

In such a capacity, the group, which also features electrical turbine manufacturer, Wartsila, would seek a Power Purchase Agreement (PPA) with the winning bidder on BEC’s transmission and distribution management contract.

Via a PPA, its power plant would sell the electricity it produced to BEC’s transmission and distribution business under terms that would likely include a fixed price and contract duration.

Mr Wilson did not go into detail on why the FOCOL/Emera/Wartsila consortium had elected not to participate in the BEC deregulation process, other than saying its members wanted to stick to their areas of expertise.

“We reaffirmed our proposal to proceed with being an IPP,” Mr Wilson told Tribune Business, effectively confirming that the consortium had elected to remain outside the BEC tender process.

“That’s what we did. I don’t know what the implications of that are with the process, but we reaffirmed that position. They can interpret it any way that is helpful to the process or otherwise.”

When asked by Tribune Business why the consortium decided not to enter the formal BEC process, Mr Wilson responded yesterday: “We wanted to stay concentrated on what our group’s expertise is, and going further than the IPP thing.........

“I think in business often-times it’s important to stick with your knittings.”

Mr Wilson told Tribune Business in July that the trio’s multi-fuel power plant had the potential to save the Bahamas “in excess of $100 million per annum” through reduced fuel costs.

Arguing that the consortium could “compete against anybody”, the plan was to construct a power plant of at least 100 MW on FOCOL-owned land in New Providence.

“The bottom line is that we believe we have submitted a special proposal that we think offers the potential of saving nine-figure monies per annum for the country,” Mr Wilson told Tribune Business then.

“It would be Bahamian controlled and managed, and would save the country well in excess of $100 million per annum.

“We have the financial and technical capacity to meet whatever the needs of the country could possible be. With these two partners, we can meet any needs the country asks.

“Scale is not an issue for us. Let us know what you need. The group has the capacity to bring whatever quantum of money the country needs, and create a very special situation.”

Wartsila, a Finnish-headquartered company, would have brought its expertise as “the largest engine manufacturer in the Caribbean” for power plants, while Emera offers the technical and administrative capacity to operate the power plant.

Both Wartsila and Emera have deep financial pockets, while the latter also knows the territory as the 80 per cent-plus majority owner and operator of Grand Bahama Power Company.

Emera has long wanted to expand its involvement and assets in the Bahamas, and produced a consultant’s report on BEC’s inner workings - its weaknesses and needed reforms - for the previous Ingraham administration. The Canadian power giant was also keen on taking over BEC, either via a management agreement or outright purchase.

However, Mr Wilson also said back in July that the consortium was not interested in acquiring BEC, especially given the “philosophical opposition” to the Government’s initial privatisation foray.

This they would have been required to do, especially on the generation side, where the winning bidder will be the minority partner in a joint venture with the Government.

It is thus possible that the FOCOL/Emera/Wartsila consortium was put off by both the criteria set by the Government and the BEC bid structure established in the Request for Proposal (RFP) document.

Tribune Business knows of at least one other group that had submitted a power plant solution for the Bahamas’ energy woes to the Government back in late 2012, but ultimately decided not to submit an offer under the tender process unveiled in August.

In common with FOCOL/Emera/Wartsila, it plans to offer itself as an ancillary services or power supplier to whatever emerges from the BEC tender process.

Tribune Business revealed two weeks ago that there was disquiet among numerous groups that obtained a copy of the BEC RFP, as shown by the fact that only nine of the 13 who paid their $25,000 ultimately came through with bids.

And of those nine, just six qualified to enter the so-called ‘pricing round’, where the bidders - four on generation, two on transmission/distribution - have to price their bids.

In particular, Tribune Business reported that there was concern that the Government was expecting the successful bidder(s) to refinance BEC’s existing $300 million debt pile without the benefit of a sovereign guarantee - as is the current situation.

The concern here is that without a sovereign guarantee, such refinancing may be very difficult to obtain. And the interest rates attached to any refinanced BEC debt will be much higher than they are presently, an increased cost that might have to be passed on to consumers.

Tribune Business understands that the Government wants each bidder to supply profit projections, which some are interpreting as a sign that either it wants to impose more taxes or get “their percentage” cut off the bottom line.

The Government’s BEC reform plan, which is the first step in deregulating/liberalising the Bahamian energy sector, involves splitting the Corporation into two - between its generation/transmission and distribution assets.

Tribune Business was told, though, that previous electrical utility ‘splits’ had avoided common ownership between the two sides.

But, in BEC’s case, the Government will retain equity ownership - 100 per cent in the case of the transmission and distribution business, where the winning bidder will have a management contract only, and a majority stake on the generation side.