By NATARIO MCKENZIE
Tribune Business Reporter
The Government wants the Bahamas Electricity Corporation’s (BEC) management company to guarantee a more-than 30 per cent reduction in energy costs within 24 months, with the winning bidder expected to be selected within two weeks.
Speaking with Tribune Business following a presentation at the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) Energy Security Forum, Deputy Prime Minister Philip Davis said three contenders were left in the bidding process.
While not identifying them, he confirmed Tribune Business’s exclusive revelation earlier this week that BEC will no longer be split into two.
Mr Davis said the Government had moved away from splitting the Corporation into separate generation and transmission and distribution (T&D) arms, and was moving forward with a business model that mirrors the Nassau Airport Development Company’s (NAD) arrangement for Lynden Pindling International Airport’s (LPIA) management.
And, as with the airport deal, Mr Davis said the Government will retain 100 per cent equity ownership of BEC even after the private sector manager is in place.
“Government will commit to a management company that can guarantee the reduction of the cost billed to the customer to an average of less than 30 cents per KwH (kilowatt hour) within 24 months from commencement of the contract,” said Mr Davis.
“Given that the current all-in-cost base of BEC per KwH is close to 44 cents, with customers being billed on average 40 cents, this represents more than a 30 per cent reduction. When reflected on to The Bahamas at large, this reduction will save business and residential consumers close to $200 million.”
Explaining why the Government had moved away from its initial BEC restructuring plan, Mr Davis told Tribune Business: “There was this idea of a splitting BEC into two components, the generating component and the transmission and distribution.
“Having looked at all the bids we got, the bids did not meet the expectations that we had, and we decided that it was best that the Government maintain 100 per cent ownership. From those companies that were a part of the process, we then allowed them to make proposals with respect to this new model of managing BEC.”
Mr Davis said an incentive regime would be implemented for the management company and determine its compensation.
“This regime prescribes a significant portion of the management company’s remuneration based on achieving service level targets related to fuel efficiency, rationalisation of costs, and significant improvements in reliability; that is, fewer and shorter power cuts. Effectively, the more efficiently and reliably the new BEC operates, the more the manager will get paid,” Mr Davis said.
“BEC’s credit rating for suppliers must be significantly improved. By giving it a fresh start, paying off all existing liabilities,and introducing stronger financial and operational management practices, the new BEC will be able to secure relatively better prices for fuel and other supplies than it can today.
“We also recognise BEC currently relies heavily on Light Fuel Oil (LFO), which is extremely expensive. In the short-term, therefore, we intend to dramatically change BEC’s fuel mix. As well, existing diesel generators will be refurbished and improved, and the least efficient engines will be retired.
“New dual fuel generators will be installed over the first 24 months. Within that same 24 months, the management company will introduce a new base load dual fuel generation plant in New Providence, minimising the need to use the combustion turbines,” the Deputy Prime Minister added.
“The new equipment will be much more efficient, and have much lower heat rates as compared to the existing fleet. While the new generation capacity is being installed, other innovations will be implemented to include sourcing natural gas and more efficient fuels; introducing solar technologies on New Providence; and renewable energy in strategic locations among the Family Islands.”
Likely candidates for the three remaining bidders include US-based Power Secure; Inter-Energy and China State Construction.