The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has quietly been soliciting bids to provide Bahamas Power & Light (BPL) with improved generation capacity, but without the knowledge of either the company itself or its PowerSecure manager.

Multiple sources, including some linked to energy industry players approached, said several groups had been invited to participate in “a very weird Request for Proposal (RFP)” initiated by the Christie administration.

Tribune Business was told that the process, run directly out of Prime Minister Perry Christie’s office, set different terms and bid criteria for the various energy groups, with timelines similar to the tight deadlines involved in the New Providence landfill tender.

This newspaper’s contacts said the leading contender appears to be New Fortress Energy, the subsidiary of a $72 billion New York-based asset manager, which signed a 2015 agreement to supply liquefied natural gas (LNG) to Jamaica Public Service Company (JPS), that Caribbean island’s energy provider.

Tribune Business was told that New Fortress had partnered with BISX-listed FOCOL Holdings, but the company’s chairman, Sir Franklyn Wilson, “categorically” denied this when contacted yesterday by this newspaper (see other article on Page 1B).

Tribune Business, though, can reveal that the Government’s efforts to solicit new generation capacity for BPL have taken place without the knowledge or involvement of BPL or its management company.

PowerSecure, which has four years left to run on a five-year management contract worth potentially $25 million, or a maximum of $5 million per year, is understood to have only learned of the Christie administration’s plans on Friday.

Tribune Business, meanwhile, was also told that the ‘free electricity’ proposal contained in the Progressive Liberal Party’s (PLP) 2017 election manifesto came directly from New Fortress Energy.

Some contacts suggested that the Government was planning to quietly sign-off on an agreement with New Fortress within the next two days, prior to the general election, but Cabinet ministers could not be reached yesterday to confirm this.

“Fortress has been in the Bahamas for more than nine months behind the backs of BPL and PowerSecure. They have been talking directly to the Office of the Prime Minister,” one source, speaking on condition of anonymity, told Tribune Business.

“They and five other companies were invited on a very weird RFP. Some were asked for bids on 170 Mega Watts (MW) of additional generation capacity, and some were asked for bids on replacing the stand-by generation.”

The source, intimately familiar with developments, said the Government had invited the six groups to submit offers at “the very last minute”.

“If you’d like to bid, here are the dates,” they said of the Government’s approach to the ‘RFP’. “Most of those dates were after Parliament had been dissolved.”

Tribune Business was informed that the bid letters were issued by Creswell Sturrup, permanent secretary in the Prime Minister’s Office, while meetings with the groups were co-ordinated by Mr Christie’s senior policy adviser, Sir Baltron Bethel.

Apart from New Fortress, other potential bidders contacted by the Prime Minister’s Office were said to include Leidos of Orlando, Florida,

A trusted Tribune Business source, close to one of the groups solicited, told this newspaper: “There hasn’t been a formal RFP, but they got called by the Energy Reform Committee from the Office of the Prime Minister.

“They said: ‘We need a proposal from you in less than a week. The group managed it, and then got another call saying: ‘We need you here [in Nassau] to give a full presentation’ in three working days. They said it was that day, or nothing.”

The source added of the process: “Trying to do something so close to the election, something smells funny. It’s almost like somebody’s trying to sneak something huge in under the radar at the last minute.

“PowerSecure confirmed that this is happening, and they didn’t know anything about it until yesterday [Friday].”

Several contacts yesterday expressed scepticism that the Government would sign an agreement with New Fortress, seemingly binding the incoming administration, right before a general election.

However, the 2002-2007 Christie administration did exactly that in seeking to seal the Bahamas Telecommunications Company’s (BTC) sale to Bluewater in the days before it was voted out of office. And Prime Minister Perry Christie, upon being re-elected to office, expressed outrage that on the day of the 2012 election the former Ingraham administration had asked the Attorney General’s Office to “authenticate” its signing of a west New Providence water franchise agreement.

Apart from the impact on PowerSecure’s management agreement, the other questions stemming from the Government’s generation activity are the absence of a formal Request for Proposal (RFP) and the last-minute rush.

The seeming last-minute scramble over BPL’s generation capacity is reminiscent of the eight working days interested parties were given to bid on the New Providence landfill’s management and remediation contract.

The Government’s rationale over BPL has yet to be explained, but the similarities with the landfill tender suggest its scrambling may be connected to its commitments under the Heads of Agreement with Baha Mar’s new owner.

The Christie administration has promised Chow Tai Fook Enterprises (CTFE) that it will “address reliable and consistent supply of electricity on the island of New Providence, which will include the ability to meet the requirements of the project”.

This involves the installation “of all supporting infrastructure necessary to support secure and dependable electricity supplies to the project, without the need for unusual load-shedding or other interruption in electricity supply to the project”.

This has to be completed by December 31, 2017, a deadline that the Government and BPL/BEC are unlikely to meet given that all are cash-strapped.

This leads into the other factor likely motivating the Government’s action over BPL’s generation; the need to refinance the company’s $650 million legacy liabilities, and the difficulty it is having in doing so through the preferred route of a rate reduction bond (RRB).

The RRB would raise new debt to pay out all BEC’s legacy debts, pension deficit, environmental liabilities and such like, while also removing them from BPL’s balance sheet, thus freeing the utility to invest in new and enhanced infrastructure.

Until this happens, BPL and PowerSecure’s hands are tied when it comes to moving forward, especially in achieving lower-cost energy that is more reliable, with fewer outages and blackouts.

The Government has found placing the RRB more difficult than expected, with financial institutions repeatedly telling it that the price (interest rate) being offered is too low to compensate potential investors for the risk they would be taking.

Given that RRB payments to investors would need to be financed by BPL customer payments, this would likely require an increase in electricity tariffs, which is why the Government has likely ‘kicked the can down the road’ past the 2017 general election.

However, finding a group to take over management of BPL’s existing generation assets, finance install new turbines and, eventually, pay for and construct a new power plant, would enable the Government to meet its Baha Mar commitments without going the RRB route and burdening Bahamian consumers.

In doing so, the Government would be performing a ‘u-turn’ and going ‘full circle’, back to the structure proposed in the 2013 BEC RFP, which sought to split the utility’s generation assets from the transmission and distribution (T&D) operation.

Instead, the Christie administration elected to adopt the so-called ‘NAD model’, named after the airport, and which involves the Government hiring a private sector manager but keeping ownership of the company and underlying assets.

It is unclear whether, and how, the Government’s generation manoeverings will impact the contract with PowerSecure, although the latter is understood to be increasingly frustrated that its hands are tied financially, while none of its recommendations to improve BPL are being acted upon.

Any proposal by New Fortress would almost certainly involve the supply of LNG, as BPL’s primary fuel, from its plants in Florida. While the details of its plan are unknown, the company would likely guarantee a fixed power rate, or kilowatt per hour.

The use of LNG would likely require the construction of storage and regasification facilities on New Providence, and the installation of new ‘dual use’ generation turbines able to burn different fuel types.

Several Tribune Business sources suggested yesterday that LNG would be brought into New Providence at Arawak Cay, rather than Clifton Pier, and then taken by pipeline to a new power plant.

The new power plant would be the final step, with New Fortress likely to seek a 20-25 year power purchase agreement (PPA) for BPL to take its electricity supply.

Several energy industry sources, though, said New Fortress had no experience in managing power plants, as its expertise lies in LNG supply. “It has to involve bringing in LNG and building a new plant,” one contact said of their involvement.

Another, referring to the PLP’s election manifesto, added: “The whole idea of ‘free electricity’ was floated out of a conversation with Fortress.”

Tribune Business was also told that New Fortress’s LNG deal with JPS had not proven as successful as initially touted, especially when it came to price, which had forced the Jamaican utility to increase its LNG purchase volumes to make the numbers work.