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Shell Open To New Power Plant Ipo

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

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.

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Minister of Public Works Desmond Bannister.

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.”

Comments

concerned799 8 months, 3 weeks ago

No mention of climate change in this piece? Didn't know we had time to run out another 50 year lifespan power plant before we finally had to act? Must be something in all those alarming UN reports I missed that says still time to build more fossil fuel plants?

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proudloudandfnm 8 months, 3 weeks ago

AT some point this power plant will be run by BEC.

If you fool enough to invest ya money in a BEC power plant inbox me. I have a toll bridge in NY to sell dead cheap...

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realitycheck242 8 months, 3 weeks ago

Going forward every new critical infrastructure built on this chain of islands should be elevated 30 feet minimum above sea level. That includes Airports, Power stations, Hospitals, clinics, water pumping stations, important government offices and the like. Have you readers ever wondered why the Americans bought the highest land in Nassau city and are building their new Embassy on the highest point in downtown Nassau ? Do you think they know something that we don't .? hint hint they have many supercomputers In their universities and they have ran simulations on what climate change will do to year by year going forward. Dorian was a baby compared to their results.

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Porcupine 8 months, 3 weeks ago

We have access to the same information. We just ignore it. Our leaders speak of business as usual. Building bridges, increasing tourism, buliding new fossil fuel energy plants. From the very top on down in our political system, it seems not one has the brains or the vision to lead our people. Not one! On of the most important things this government could do for the safety of its people is to make sure that everyone has access to a tornado proof shelter above 30'. Wouldn't that be the take-away after Dorian to anyone with a second grade education?

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John 8 months, 3 weeks ago

So what is the difference between Bahamians owning shares in the Shell plant and owing shares in BPL. From what talks are being floated around, Shell will construct the plant and operate, just like Wartsilla is doing. They will sell power to BPL. So if you purchase shares in Shell, then your interest will be based on power production only at that plan, unless others are constructed in the future. If BPL sold shares, it will be on the wholesale purchase of power and distribution. And it will not be limited to the one shell plant.

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Well_mudda_take_sic 8 months, 3 weeks ago

By hook or crook, the following individuals will likely be among the privileged select few who end up directly or indirectly owning an equity stake in the joint venture activities between Shell North America and BPL:

  • FOCOL controlled by Snake and/or business cronies of Snake
  • Whitney Heastie and/or his family members
  • Donovan Moxey and/or his family members
  • Desmond Bannister and/or his family members
  • Minnis and/or his family members
  • Turnquest and/or his family members

Directors and senior executives of Shell North America and entities higher up in the Shell group of enterprises could all too easily find themselves looking down the barrel of a loaded heavy gauge shot gun, i.e. charges that might well be brought under the Foreign Corrupt Practices Act in the U.S.

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Porcupine 8 months, 3 weeks ago

Was thinking the same thing..........................

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Bahamianbychoice 8 months, 3 weeks ago

I believe the original plan prior to the Board firings was Shell would construct the plant and zero cost to the Bahamian tax payers. The infrastructure (pipelines) that would eventually deliver the LNG to say, for example, the cruise ships....BPL would own and receive so many cents per gallon of fuel delivered. The income would be used to assist in improving the financials of BPL and turning it into a cash positive company and off setting the cost of the RRB for the taxpayers. Now..... an IPO for purchase of shares will be offered to those who can afford it. We all know who will purchase those shares. The shareholders will make the money while the Bahamian taxpayer are burdened to pay back the RRB. You just can't make this up....

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