BPL: Shell bid process ‘transparent and fair’


Tribune Business Reporter


BAHAMAS Power & Light’s (BPL) top executive yesterday defended Shell’s selection as its preferred generation partner as “transparent and fair”, revealing 50 per cent of bids offered long-term solutions.

Whitney Heastie said BPL was “comfortable” with the outcome, despite concerns that the utility and its advisers had not been comparing ‘apples with apples’ as a result of a tendering process that initially sought separate bids for fuel supply and 80 Mega Watts (MW) of short-term generation capacity. “We went out to tender in October of last year for the 80 MW generation facility,” Mr Heastie confirmed. “In the tender we specifically requested bidders to provide options for fuel. There were two options, one with fuel and one without. There were 19 who responded.

“Some did come back and say that five years wasn’t long enough, and we did say they were free to put an offer beyond five years. More than 50 per cent of the venders replied with proposals that exceeded 10 years. I think when we look at the process, which had been audited, that everyone was given the same opportunity - whether it was just asset-based or asset and fuel-based - to bid in a transparent way. We feel comfortable, not only as a company but as a Board, that the process was not only transparent but fair.”

Tribune Business understands that some rejected bidders disagree with this interpretation, and claim the process lacked transparency due to the fact participants submitted different bids on a criteria that seemed to change.

While Shell North America has been confirmed as the preferred bidder to construct a 270 MW liquefied natural gas (LNG) fuelled power plant at Clifton Pier, Mr Heastie admitted the cost savings for Bahamian businesses and consumers will be reduced by BPL’s own debt load and bloated operational costs.

BPL is estimated to be carrying around $350 million in bond and bank debt, a $100 million unfunded pension liability, and environmental liabilities that could collectively cost around $650 million. Consumers will have to pay for these and other costs via their bills until these liabilities are refinanced by the proposed Rate Reduction Bond (RRB).

Mr Heastie declined to divulge details on the Shell deal, on the basis that negotiations are ongoing between itself and BPL to finalise the new power plant’s contract. While consumers will enjoy savings and reduced power costs, he was unable to say how much, and said these would be reduced by BPL’s ongoing financial woes.

“We are still in negotiations. We don’t discus things while in negotiations,” he added. “However, it would be remiss of the Board and me if we didn’t acknowledge the fact that the change to LNG is to move the needle lower.

“What’s very difficult for us is that the company is not debt free, and so if we’re looking at this whole equation without debt it would be an easy answer. The point; is we don’t. We have to look at the holistic nature of what we are dealing with. There is the cost of fuel and the non-fuel cost element, which includes the day-to-day operations of this entity and debt that has to be paid. We anticipate that at the end of the day that there would be a positive impact that the Bahamian people will see.”

BPL executives also confirmed they intend to restructure and downsize the utility’s workforce in a bid to realign its cost base. PowerSecure, the former manager, recommended cutting staffing levels by 30 per cent by the third year of its takeover - a move that, based on the current 1,050-strong workforce, would see 233 jobs go.

Tribune Business understands that BPL is looking to shed around 300 jobs, and will probably look to achieve this - in the first instance - by offering voluntary separation (VSep) packages similar to those used by the Bahamas Telecommunications Company (BTC) in the hope older workers may leave of their own accord.


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