The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government will today meet with the ‘preferred’ energy bidder selected by the former Christie administration to “hear them out” on their proposal, Tribune Business can reveal.

Desmond Bannister, minister of works, told Tribune Business that the Minnis administration had reviewed documents supplied by New Fortress Energy on its offer to supply the Bahamas with liquefied natural gas (LNG) and enhance energy generation.

“My understanding is that there has been no agreement put in place by the former administration,” Mr Bannister said. “There is a proposal from New Fortress which the former Government had considered.

“We will meet with New Fortress on Monday [today], and want to hear them out on what they are seeking to put forth.”

Significantly, Mr Bannister said New Fortress’s proposal had also been discussed between the Government and Bahamas Power & Light (BPL). This, by extension, would include BPL’s manager, PowerSecure, and would mark a significant departure from the former government’s approach.

For Tribune Business, in revealing the Christie administration’s secretive energy Request for Proposal (RFP) and talks with New Fortress, found out that both BPL and PowerSecure had been ‘kept in the dark’ on the discussions despite the direct impact on themselves as potential customers of the electricity generated.

“We’ve reviewed the documents they’ve provided,” Mr Bannister added of New Fortress, “and discussed it with BPL, but in any process that goes forth under the FNM government, it is going to be done publicly before we put in place.....

“We will look at everything and, at the end of the day, make a decision in the best interests of the Bahamian people.”

Tribune Business sources had described the Christie administration’s energy RFP, which was run out of the Prime Minister’s Office, as “very weird” and lacking in transparency, with different bid terms and criteria for different groups.

Indeed, the multi-billion dollar AES Corporation described the process as “non-transparent” and “not what we are used to” in other central American and Caribbean markets where it has competed on LNG supply and power generation deals.

Mr Bannister acknowledged that there had been “some complaints” about the generation reform process initiated by the previous government, and pledged that the new administration would be fully transparent on energy sector reform so that the Bahamian people “feel comfortable” with the decisions it made.

“There is tremendous interest in this sector, and whatever we do will be thoroughly researched and we will let the best proposal prosper,” the Minister said.

“There have been some complaints [about the previous RFP], but whatever we do is going to be something that is transparent, and that the Bahamian people can look at and feel comfortable that a fair, open process has been followed in making a determination.”

Mr Bannister declined to specify the nature of the “complaints”, and who had made them. Nor did he disclose the identities of “other proposals that have come forward” to the Minnis administration on energy reform.

“I want to respect everybody who has spoken to me,” he said to explain why New Fortress’s potential rivals have not been disclosed. “The only thing I would say is that every single entity that comes forward will get a good look.”

Members of the former Christie administration have urged the Government to act swiftly and move ahead with the New Fortress deal they left in place, arguing that it will deliver significant energy cost savings and economic benefits for the Bahamian people.

Now-Opposition leader, Philip Davis, said the proposed 25-year power purchase agreement (PPA) with New Fortress would result in fuel cost savings via the switch from ‘Bunker C’ and heavy fuel oil to LNG, while also upgrading New Providence’s electricity generation capacity to avoid the now-frequent summer power outages.

He added that New Fortress had offered to supply energy at 13.5 cents per kilowatt hour (kwh) from 120 Mega Watts (MW) of “supplemental”, or additional, generation units that would be installed at BPL’s existing Blue Hills power plant.

And, looking longer-term, Mr Davis said the price of energy supplied from a new 260 MW power plant, also fuelled by liquefied natural gas (LNG) and constructed at Blue Hills, would be 10.35 cents per kwh.

“This pricing strategy will accrue significant savings on electricity to the customers of BPL,” Mr Davis had asserted, but produced no comparison between BPL’s current prices and those involved in the New Fortress Energy deal.

This was immediately picked up by numerous observers, including Phenton Neymour, a former Cabinet minister responsible for BPL’s predecessor, BPL, who called on the now-Opposition to state the cost savings - either in percentage form or actual figures - from the deal for Bahamian households and businesses.

Mr Neymour also questioned whether the costs referred to by Mr Davis were ‘all in’ costs, including both generation and fuel prices, or just one of these components.

The draft ‘Heads of Terms’, meanwhile, include an ‘escalator’ clause that allows New Fortress to increase prices by 3 per cent per annum, beginning in 2022.

Apart from power generation, the proposed deal involves New Fortress investing $10 million in a “smart grid power management system for the Bahamas” - a sum that will be paid back by BPL consumers.

Mr Davis said the terms required New Fortress to construct new liquefied natural gas (LNG) storage and regasification terminals at Arawak Cay and in Freeport.

It will also, if approved, “design, develop and construct an LNG bunkering and transshipment hub” near Freeport. Under an associated bunkering license, Mr Davis said New Fortress will pay “incremental licensing fees of up to $7.5 million annually”.

Other requirements were said to involve New Fortress converting BPL’s existing oil-fuelled power generation facilities on Bimini, Abaco, Eleuthera and the Exumas to burn LNG.

And, seemingly taking advantage of New Fortress’s parent, a $72 billion New York-based asset manager called Fortress Investment Group, the Christie administration also agreed that it could “lead and arrange” a $600 million rate reduction bond (RRB) to refinance BPL’s legacy debts and liabilities.

Given the Minnis administration’s decision to cancel the landfill RFP, form and consistency would seem to dictate that it will do similar with the New Fortress deal, and put the generation upgrade back out to tender via a public RFP.

But with the Bahamian economy stuck in ‘low growth’ mode despite Baha Mar’s impending opening, and the Government’s latest borrowing binge set to potentially add $722 million to the $7 billion-plus national debt, energy sector reform is becoming increasingly vital to turning this nation’s prospects around.

Reduced energy costs, and a more reliable supply, would improve the competitiveness and profitability of all Bahamian businesses and the wider economy, as well as stimulating increased consumer demand from greater disposable income.

This is not lost on Mr Bannister, who conceded that the Bahamian energy sector has fallen behind “the rest of the world” and is causing suffering for consumers.

“This is one of the major decisions we have to make,” he told Tribune Business of energy reform. “The energy sector is lagging behind the rest of the world.

“It raises very serious concerns for me; how we deal with our summer loads, and how we move forward so that the Bahamian people can be treated in a fair manner with respect to how they are billed, and the energy provided to them is reliable and safe so we don’t have all the problems faced in recent times.”

While New Fortress is backed by the ‘deep pockets’ of its immediate $72 billion parent, which was acquired by Japan’s Softbank earlier this year, it is a relatively new player in the energy sector.

It is also more an LNG supplier, rather than power plant builder, owner and operator, which has led some to question its suitability for the Bahamas and the draft proposal struck with the previous administration.

Energy industry sources have suggested that New Fortress’s deal with Jamaica Public Service Company (JPS) has failed to deliver the projected benefits, and forced that island’s utility to convert more of its generation capacity to LNG to ‘make the deal work’.