By NEIL HARTNELL
Tribune Business Editor
TWO liquefied natural gas (LNG) giants were yesterday said to be the front-runners for Bahamas Power & Light’s (BPL) generation contract, which has become “bogged down” in Cabinet.
Multiple Tribune Business sources familiar with developments said Shell Gas North America and New Fortress Energy were the main contenders for the energy supply contract, which will likely involve construction of a new LNG-fuelled power plant at Clifton Pier.
This newspaper was told that BPL’s Board and consultants had recommended Shell as the preferred bidder, but New Fortress’s offer had several qualities that were gaining traction among some ministers - hence the delayed Cabinet decision in awarding the contract.
The drawn-out wait yesterday prompted one source to suggest that the Minnis administration was little different from its PLP predecessor when it came to moving swiftly, and decisively, addressing the Bahamas’ long-standing energy woe - and its need for cheaper, more reliant power.
“They’ve been in office 11 months now, and this should have been dealt with in six,” one observer, speaking on condition of anonymity. “It’s bogged down. Nothing is fundamentally improved. We are still living off rental generation, and in a short while oil prices will go up and we will not have done anything to create any energy security in the country. It’s just more of the same.” Another added: “The process has been derailed. Whatever comes out now is the same old, same old.”
Desmond Bannister, minister of works, and Darnell Osborne, BPL’s chairman, both declined to confirm Shell’s selection as the preferred bidder when contacted by Tribune Business yesterday.
Mr Bannister, who has ministerial responsibility for BPL and was in the process of returning to the Bahamas from a holiday, pledged that approval of the winning bids would not take much longer.
“I suspect we’ll have that dealt with very shortly. That won’t be out there much longer,” he told Tribune Business. As for the Shell recommendation, he added: “I can’t confirm or deny that. It would be wrong for me to do that.... I’m sure you have very good sources.”
Mrs Osborne, meanwhile, suggested that BPL’s long-term refinancing via the proposed Rate Reduction Bond (RRB) offering was effectively “on hold” until the Government made a decision on the long-term generation contract.
“We made our recommendation to the Government, to the Cabinet and we’re waiting for the Prime Minister to make the announcement,” she said, indicating that the generation deal could determine how much funding is required through the RRB.
“Let’s just hope the Government can make the announcement soon, and once that’s made we can move forward,” Mrs Osborne added. “Right now, everything’s on hold, but the Board has certainly completed its work in terms of getting the ball rolling.”
BPL last year called for bids to supply it with 80 Mega Watts (MW) of short-term generation capacity for a five-year term, essentially seeking a better deal than it obtained from current provider, Aggreko.
However, BPL executives were quick to acknowledge that long-term generation offers were also welcome, and “modified” the process accordingly. Among the 19 bids received were those from Shell Gas and New Fortress, both of which are offering LNG-driven power plant solutions.
Tribune Business sources said BPL was “very keen on the solution offered by Shell, and the Board made a recommendation for Shell North America and an LNG plant at Clifton”.
However, one contact added: “New Fortress has a more complete solution, and has the ability to finance the entire project.”
New Fortress, the subsidiary of a multi-billion dollar New York asset manager founded by its principal, Wes Edens, was selected by the former Christie administration as its preferred energy reform partner in a highly-secretive process that was exposed by Tribune Business just before the 2017 election.
The group, which has already inked an LNG supply deal with Jamaica’s electricity supplier, Jamaica Public Service Company (JPS), is said to have merely dusted off its prior proposal, refined it and then resubmitted it under the new process.
And New Fortress also has some significant local partners, including BISX-listed Arawak Port Development Company (APD), the Nassau Container Port’s operator, and Bahamian investment advisory firm CFAL, formerly Colina Financial Advisors.
Mike Maura, APD’s chief executive, told Tribune Business earlier this year: “In an effort to participate in the Bahamas’ energy reform, APD has partnered with New Fortress Energy and CFAL in a tender to BPL to provide natural gas-fuelled power generation.
“The group believes that the new business opportunity provides a national benefit and shareholder value. The introduction of LNG to the Nassau Container Port provides a new revenue stream for APD, and offers new cold storage opportunities for local seafood and agriculture.
“The new business will add incremental income, which will serve to cover a portion of the port’s operating expenses, while reducing the risk to APD’s 11,000 shareholders stemming from a dependence on traditional cargo throughput, and introduce new investment opportunities for all Bahamians.”
Mr Maura did not provide further details on the APD-New Fortress-CFAL offer, although it will likely involve the development of an LNG storage/regasification terminal at the Arawak Cay port location.
New Fortress, as the fuel supplier, will likely ship the LNG to APD from its facilities in Florida. From there, the gas will likely be transported by pipeline from Arawak Cay to BPL’s Blue Hills power plant, where it will be used to drive the utility’s generation equipment.
New Fortress also recently agreed an LNG supply deal with Freeport-based Polymers International, which will see the latter use the fuel to run its boilers. Greg Ebelhar, Polymers’ chief operating officer, revealed that New Fortress was also interested in establishing an LNG terminal in Grand Bahama.
A key attraction of the Bahamas’ market for LNG suppliers, besides local power needs, is the possibility to provide fuel for the hundreds of cruise ships that ply this nation’s waters. Around 20- per cent of such vessels already use LNG, and more are expected to convert in the near future.
Tribune Business sources also suggested that Shell’s desire to secure the BPL fuel supply and long-term generation contract was motivated, at least in part, by a desire to stop New Fortress dominating the Caribbean LNG market.
The latter announced a $1 billion infrastructure investment in Jamaica in late 2017, which includes the construction of several power plants, and securing the Bahamas would give New Fortress a second - and one of the largest Caribbean markets - and the one that is closest to the US.
Shell Gas is largely a fuel supplier, not a power plant owner/operator, and this newspaper understands that it has already reached out to other BPL bidders for potential assistance with these aspects should it win.