By NEIL HARTNELL
Tribune Business Editor
A Cabinet Minister yesterday pledged the Bahamas will have “the most competitive energy prices in the region” through selecting Shell as Bahamas Power & Light’s (BPL) generation partner.
Desmond Bannister, minister of works, told Tribune Business that Shell North America’s bid offered to “significantly cut the cost of energy” for Bahamian businesses and households, although neither he nor BPL provided any figures.
Shell will now seek to meet New Providence’s long-term energy needs by constructing a liquefied natural gas (LNG) fuelled power plant at Clifton by 2021. In the interim, Mr Bannister said BPL would seek to manage short-term generation costs by obtaining a “significantly reduced” price from Aggreko, supplied of 80 Meg Watts (MW) in short-term generation.
The Minister also defended the BPL tender process from criticism by rejected bidders, telling Tribune Business it was handled “in the most transparent manner of any government process out there for a very long time”.
He added that the Minnis administration also hired the Ernst & Young (EY) accounting firm, which has conducted a number of government forensic audits, to review the bidding process and it confirmed it was managed fairly.
Tribune Business exclusively revealed last week that Shell North America LNG had been recommended as the preferred bidder by BPL’s Board and management, with the Cabinet approving the decision this week.
“There are two objectives as far as I’m concerned,” Mr Bannister told Tribune Business. “One was to provide a reliable source of power for the Bahamian people, and the other was to significantly cut the cost of energy.
“We believe we the decision made is going to achieve both these objectives, making the cost of business a lot lower and giving Bahamian residents an opportunity to cut their cost of energy.”
He added of the potential energy savings from Shell’s offer: “The figures we looked at were significant, but it’s best for BPL to provide that. They were significant. “Based on the figures we have seen, there wouldn’t be anyone in this region who would be able to compete with us in terms of the cost of energy. We would definitely once again be able to ensure businesses will not have the high energy cost overheads they have now.”
BPL provided few details last night in confirming Shell has been selected to lead development of New Providence’s new power plant, other than to say construction of its LNG-fuelled solution will be completed in 2021 and provide up to 270 Mega Watts (MW) of capacity.
With a three-year gap until the potential benefits are felt, Mr Bannister said BPL would now seek to renegotiate its 80 MW short-term rental generation agreement with Aggreko.
“The cost associated with our agreement with them is going to decrease significantly,” he told Tribune Business, explaining that the wait for Shell’s confirmation had delayed talks with the short-term generation provider.
However, Tribune Business can reveal that not everyone is happy with the Government’s/BPL’s selection, especially some of the 18 bidders who were rejected. Mr Bannister confirmed he had last week received a letter complaining that the bid process’s integrity had been undermined by BPL executives repeatedly indicating in public they were leaning towards an LNG solution.
This newspaper understands that some were particularly exercised by remarks made by Whitney Heastie, now BPL’s chief executive, when he talked about a potential LNG solution for Abaco at that island’s Business Outlook conference last year.
While those comments were made before the Request for Proposal (RFP) process was launched in November 2017, Mr Heastie then spoke about the likelihood of an LNG plant for New Providence in late February 2018.
He said that it could take between six months to two years to develop such a facility based on the bids received, and added: “That’s simply based on the infrastructure that they can bring to bear.
“Some are saying they can bring a floating barge and we can start to export to the assets right away. Others are looking at more fixed-based assets. That obviously takes a whole lot more time to construct before you can start fuelling those assets. So, it’s strictly a matter of the vendor that’s putting in the proposal.”
Confirming that he was aware of such concerns, Mr Bannister defended the BPL tender process while agreeing that persons were free to voice their complaints to the Government.
“That was a view they took,” he told Tribune Business. “We’re trying to be as transparent as possible. We are very concerned about being very transparent and accountable in this process.
“When we had finished we turned it over to EY and asked them to look at this process. EY brought in a team from Cayman and elsewhere, and thought we had been very fair with the process.
“If there are any complaints we would certainly like to hear them, and we want to be as transparent as possible. We want to do it right, and as far as I’m concerned it was done in the most transparent manner of any government process out there for a very long time.”
Tribune Business sources suggested concerns over the bidding process, and Shell’s selection, were divided into two broad categories as follows:
- Shell is a fuel supplier and energy trader; it is not a power plant builder, owner and operator, which is what is required. BPL’s release last night spoke to Shell “leading a consortium” to develop the project, but the other members were not disclosed.
And Tribune Business was informed by sources close to multiple rival bidders that Shell had reached out to them prior to the bid process, seeking their assistance with various aspects of generation.
BPL’s statement last night said: “Nineteen companies passed the vetting process but, in BPL’s Board’s opinion, Shell NA provided the best solution for the company’s new direction and its commitment to renewable energy.
“In the Board’s opinion, Shell NA’s commitment to power generation with the inclusion of LNG in BPL’s fuel mix will provide long-term energy security, new employment opportunities for Bahamians, stimulate economic growth and the stabilisation of customer rates.”
However, one source, speaking on condition of anonymity, said: “What is unclear is exactly what Shell is doing. Shell doesn’t make electrical engines, turbines. I wonder who they’re getting their engines and technology from? Shell is not in the power business; Shell supplies fuel. I don’t know what technology they would use.”
- The other category of concern, Tribune Business was told, relates to the structure of the bidding process itself. BPL initially went out to tender for two contracts: Fuel supply and the provision of 80 MW of short-term generation for a five-year period.
However, recognising that the latter was not a practical solution for BPL, many bidders also supplied a long-term generation proposal as a result. As a result, several sources said BPL and its Canadian consultants, Sancon Contracting, ended up having to compare “apples with oranges” as some bidders offered only on short-term generation, others on long-term, and the remainder a combination of both.
“What I don’t understand is that the original BPL RFP in November called for two things: Fuel supply and 80 MW of temporary generation,” one source said. “None of which are in this award. It had nothing to do with an LNG plant. If everything was evaluated on an apples for apples basis, I think it would have been a different outcome.”
Several bidder sources suggested the tender had evolved from “a generation RFP to an LNG RFP”, and one added: “The process was not clear to everybody. They asked the bidders for a five-year proposal on 80 MW of rental generation.
“Some people bid on five years, some people did long-term and some did both. It wasn’t exactly clear what they needed to compare apples with apples.” The source described the different durations for short and long-term generation as “a major, major flaw” given that those submitting 20-year proposals could offer much lower rates, and better financial terms, than their short-term counterparts.
Mr Bannister, though, told Tribune Business: “People are free to voice their concerns and we, the Government, are going to listen to their concerns. Every time we do something, we try and improve the process as best we can.
“We’re trying to change the paradigm, and whenever you do something like that you will face some criticism, but we’re trying to do it properly and put all the cards on the table. Let’s hope it works out for all of us.” He added that Shell was more than capable of defending its own proposal.
BPL said: “Shell NA has proposed an integrated ‘gas to power’ solution that would include construction of an LNG plant at Clifton Pier and enable BPL to produce up to 270 MW of power generation.
“This will have a positive impact on consumers and the environment. The LNG project is scheduled for completion in 2021. Shell NA has committed to continue providing HFO (heavy fuel oil), diesel or other interim fuels until LNG and the necessary power infrastructure is operational.”