The Tribune

* DPM affirms utility can speak to other providers

* But still wants Shell to have 'every chance at deal'

* Talks only finish if terms 'where BPL wants them'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light (BPL) has ditched Shell North America's exclusivity and has "a free hand" to negotiate the best electricity prices for New Providence with any supplier that can meet its terms.

Desmond Bannister, deputy prime minister, yesterday confirmed to Tribune Business that BPL is free to negotiate with the generation provider of its choice even though it and the Government still had "goodwill" towards Shell and want to "give it every opportunity to be the party that lands the agreement".

He declined, though, to state whether there was still a "preferred" bidder or give a timeline for when BPL's efforts to outsource power generation will conclude. Mr Bannister, who has ministerial responsibility for BPL, would only say that negotiations will finish when the Government and state-owned utility have the deal they want.

"BPL is still negotiating with Shell, but they also have a free hand to speak to anyone else they wish to," the deputy prime minister told this newspaper. "They're still negotiating with Shell. We still have goodwill towards Shell, and would like to give Shell every opportunity to be the party that lands the agreement."

Mr Bannister's comments back up Tribune Business' November 20, 2020, revelation that Shell North America's two-year Memorandum of Understanding (MoU) with BPL had expired, thus ending the energy giant's exclusivity on constructing and supplying fuel to New Providence's proposed new power plant at Clifton Pier.

This newspaper reported at the time that the MoU's end would enable BPL to talk to rival electricity providers in a bid to obtain lower prices and better commercial terms than those offered by Shell North America - something that has now been confirmed by the deputy prime minister.

Asked why Shell, BPL and the Government had been unable to conclude an agreement, Mr Bannister replied: "I think you know how negotiations work. Parties bring forward their proposals, and you consider them. If those proposals are not where you'd like them to be, then you let them know and they have to determine whether to come back with something that's better."

The Shell North America deal would have seen the energy giant acquire from BPL some 220 Mega Watts (MW) of generation assets that have been built, or are due to shortly be constructed, at Clifton Pier. A liquefied natural gas (LNG) regasification terminal was to be located nearby to provide fuel to the plant, which would have sold electricity to BPL via a 20-25-year power purchase agreement (PPA).

Several sources, speaking on condition of anonymity, previously told Tribune Business that the Government felt Shell was charging BPL too high a price for the energy provided by the new power plant and wanted the rates to be lower. It was also said to believe that the talks with the energy giant were dragging out too long and wanted to explore other options.

"The negotiations are going to be complete whenever they are at the level that BPL wants them to be at, and the pricing is at the level BPL wants it to be at," Mr Bannister replied, when asked about the timeline for completing talks and concerns over Shell's pricing. "I don't want to say there's a preferred party. BPL has the opportunity to say what it wants, and what our country and people need as rates."

The end to its two-year exclusivity will represent a blow to Shell North America given the time and multi-million dollar investment it will have made to secure its status as preferred bidder, which was awarded in early 2018 when the former BPL Board chaired by Darnell Osborne was in office. The potential deal was much-touted by the Government at the time.

Shell, though, has increasingly betrayed its eagerness to seal the deal with BPL in recent months by going public on several occasions. Gerard Van-Ginkel, the multinational energy giant's project director, told Tribune Business in October 2020 that "a degree of urgency" was required to close the deal for New Providence's new multi-fuel power plant.

The failure to seal the Shell deal during the exclusivity period also further delays BPL's goal of exiting the power generation business, thereby enabling it to focus solely on customer service and transmission and distribution, given that the new Clifton Pier plant represented the key element in this strategy.

And as BPL's negotiations drag out, it is Bahamian households, businesses and the wider economy that become caught in the middle, with the objective of lower-cost, more reliable and cleaner energy pushed further out at a time when all New Providence residents need all the savings they can get amid the devastation inflicted by the COVID-19 pandemic.

Shell has steadfastly refused to comment on the end to its exclusivity, citing confidentiality provisions in the MoU. However, Mr Bannister said yesterday: "BPL is interested in being able to ensure that they can come to the Bahamian people with an agreement that indicates that, once again, they're going to have more reliable service and lower prices.

"There are any number of companies operating on different islands in the country providing service, but when we are finished not one of them will come close to what BPL will offer in terms of pricing for power. It would be revolutionary. You have already seen how low the prices will come down, and they will come down even more."

Mr Bannister was referring to BPL's recent fuel hedging strategy, which has stabilised the fuel component of consumer bills at 10.5 cents per kilowatt hour (KWh) until January 2022, as well as last year's investment in 165 MW of new generation capacity. The latter's installation has brought lower fuel costs and greater efficiency, and helped to avoid the previous summer's load shedding nightmare.

BPL, meanwhile, has rented 16 MW of generation capacity from Sun Oil/FOCOL Holdings, whose major shareholders include Sir Franklyn Wilson and the Turnquest family, to help bridge the gap until a further 90 MW of new permanent supply is installed at Clifton Pier.

The BISX-listed company won the tendering process launched in May 2020, and Mr Bannister argued that the four units it is supplying will be more efficient and cheaper than the smaller 1 MW engines provided by Aggreko. The latter's rental generation units typically use the more expensive automated diesel oil (ADO) fuel, while those provided by Sun Oil will run off much cheaper propane.

"Aggreko has these little units. They're not as reliable as we'd like them to be. They take up a lot of space. There are a lot of challenges with them," Mr Bannister said. "We've bought these larger units from Sun Oil.

"Appreciate that's a Bahamian group we're working with. We look forward to working with them until such time as we have the agreement we want to complete generation. There's not going to be any more issues with BPL being unable to supply the level of power the country needs."