By NEIL HARTNELL
Tribune Business Editor
Shell North America last night confirmed it is willing to permit Bahamian ownership in part of its New Providence power plant project through what could be this nation’s largest-ever public share offering.
A spokesperson for the global energy giant, responding to Tribune Business inquiries, confirmed that local investors may get the chance to invest via an initial public offering (IPO) in the company that will be formed to hold the liquefied natural gas (LNG) terminal and associated infrastructure supplying fuel to the proposed new plant at Clifton Pier.
Desmond Bannister, minister of works, revealed to this newspaper that Shell executives have already been holding talks with Bahamas-based finance houses and major investor groups in a series of meetings understood to have continued this week.
Tribune Business understands that these discussions, which are exploratory in nature, are designed to gauge investor appetite for an equity interest in the project’s LNG component and how this would be structured.
While the size of the minority stake that could be made available to Bahamian investors has not been finalised, several sources - speaking on condition of anonymity - said it could be worth as much as $70m.
That would make the offering - if it comes to fruition - the largest IPO in Bahamian history, exceeding the $62.5m equity interest previously offered by Commonwealth Brewery. Sources said any IPO would be part of a larger $250m-$300m capital raise to finance the LNG terminal’s construction, with Shell retaining the majority stake and working with select Bahamian investors to raise the $180m-$230m balance.
Shell’s spokesperson last night declined to confirm any figures, but revealed that the project designed to resolve New Providence’s long-standing energy woes will be split into two entities. Besides the company owning the LNG terminal and related facilities, there will be a separate vehicle to own the actual power generation plant itself.
They explained that the power plant vehicle will be a “joint venture” between Shell and Bahamas Power & Light (BPL), with the latter buying all energy it produces via a power purchase agreement (PPA) that the two sides are still negotiating.
However, Tribune Business contacts yesterday suggested that neither the BPL Board or the Government have made a final decision on the state-owned utility monopoly taking an equity interest in the power plant joint venture. This is despite Whitney Heastie, BPL’s chief executive, telling this newspaper earlier this year that the utility would seek such a stake as compensation for its $95m investment in the new Wartsila engines.
Still, the Shell spokesperson confirmed to Tribune Business: “The plans are that Shell and BPL would form a JV (joint venture) for the ‘Power Company’ part of the project. The ‘Terminal Company’ would also be formed as a joint venture, with Shell as the largest shareholder and certain minority interest shareholders from The Bahamas.
“We are in commercial discussions, and will share further details when we are able. In the future, there may be the opportunity for the ‘Terminal Company’ to issue shares in an IPO to Bahamians, subject to market conditions and further discussions amongst shareholders.”
The “certain minority interest shareholders” were not identified, but this is likely to refer to the likes of BISX-listed FOCOL Holdings and the late Tennyson Wells’ Source River group, which acquired the former Bacardi plant in south-western New Providence.
Both companies own land at Clifton Pier that Shell will need access to for constructing the pier, pipelines and terminal infrastructure that will bring LNG from incoming ships to shore, where it will be converted back to gas from liquid form and then used as fuel by the new power plant. Granting them an equity interest would help compensate for use of their property.
Tribune Business’s contacts suggested another potential investor could be the National Insurance Board (NIB), which would also contribute to the $180m-$230m to be raised outside the IPO.
“I know Shell is exploring the possibility of raising capital here,” one financial services industry source said on condition of anonymity. “I know they’re looking at raising $250m-$300m in capital, but most of it will be from outside. They were looking to source $230m and bring $70m to market here. The $70m was what I understood they wanted investors to come up with here.”
Desmond Bannister, minister of works, said permitting Bahamian ownership in the planned 222 Mega Watt (MW) Shell power plant would comply with the promises made in the Free National Movement’s 2017 election manifesto.
“I can’t confirm the figures but I can tell you they’ve been contacting local investors and have a number that have indicated interest; Bahamian investors. They will be continuing that effort,” Mr Bannister told Tribune Business of Shell.
“One of the commitments we made in our election manifesto was to ensure that if a portion of BPL was privatised that Bahamian investors would have the fullest opportunity to invest in it.” In fact, the manifesto commits the Government “to ensure Bahamian ownership through a majority shareholding” - not the minority stake being offered.
And some observers would argue that talk of IPOs and capital raising is premature given that the Government and Shell have yet to sign a final agreement for the new plant’s construction. While they previously agreed a Memorandum of Understanding (MoU), key details - such as the price BPL will pay Shell for the energy produced by the new plant under a PPA.
However, Mr Bannister and BPL executives have continued to speak as if the deal’s conclusion is a near certainty. The minister assured Tribune Business recently that the new plant would be completed and ready to begin operations before year-end 2021, even though construction has yet to start.
Dr Donovan Moxey, BPL’s chairman, in his presentation to this week’s Accountants Week conference confirmed that the LNG aspect of Shell’s plant would be ready by December 2021 or in early 2022, providing a lower-cost, more efficient and environmentally-friendly fuel that will reduce consumer energy bills.
“The completion of a gas-to-power plant by Shell North America will mark the completion of the second phase of our generation turnaround strategy,” Dr Moxey said. “Shell has been a wonderful partner to BPL so far on this venture.
“We signed a Memorandum of Understanding on November 2, 2018, and we are now negotiating the definitive agreements. The Shell relationship includes 220 MW of generation capacity. Station A [the Wartsila engines] is the first 130 MW of that 220 MW.”