By NEIL HARTNELL
Tribune Business Editor
Bahamas Power & Light’s (BPL) chairman yesterday pledged he is focused on “getting the best possible deal” for its new power plant as its multinational partner called for “the timely closure” of negotiations.
Dr Donovan Moxey, pictured, told Tribune Business that BPL’s Board, which he heads, was being “very careful and prudent” in the long-running talks with Shell North America over the planned multi-fuel power plant for New Providence given that the final agreement would be binding on the Bahamian people for 20-25 years.
“This is something we’ve promised to the Bahamian people from day one,” Dr Moxey said. “We’re negotiating a 20-25 year deal that is very important to the Bahamian people and customers of BPL. We’re being very careful and prudent in how we move this arrangement forward.
“At the end of the day, whatever it is we agree with Shell, the Bahamian people are going to have to live with it for the next 20-25 years. Whatever we’re negotiating, our position is that it must benefit the Bahamian people in the short and long-term. It may be a great deal today, but will it be a great deal in five years’ time, 10 years’ time, 20 years’ time?”
Dr Moxey declined to detail which issues have yet to be resolved by the Government/BPL and Shell, or comment on the current status of the talks and when they are likely to be completed. He merely reiterated: “As a Board we have to make sure we exercise a fiduciary responsibility to get the best possible deal for all Bahamians.
“We will not conclude any negotiations with Shell until we as a Board believe we have got the best possible agreement. That’s all we’re focused on: Providing the best possible deal for the Bahamian people, and whatever it takes for us to do that, that’s what we’ll do.”
The BPL chairman spoke out after Shell released an opinion piece written by its lead negotiator, Markus Hector, Shell LNG marketing and trading’s general manager for market development, to the Bahamian media for publication in today’s newspapers.
The article, which contained little that was not already known in terms of details on the proposed power plant, did indicate, though, that Shell appears to be becoming frustrated and losing patience over the inability to conclude negotiations that kicked-off after it signed a Memorandum of Understanding (MoU) with BPL in December 2018 having previously been selected as the preferred bidder.
“Our ability to invest in the construction of an affordable liquefied natural gas (LNG) terminal, and our purchase of the new power plants, remains dependent on the timely closure of current negotiations with BPL and the Government,” Mr Hector wrote.
“As currently designed using industry standards, this project will produce the majority of power generation for the entire island of New Providence for decades to come. It will be made up of two joint ventures – the ‘Terminal Company’ to operate the LNG terminal, receiving, storing, and re-gasifying the LNG, and the ‘Power Company’ to generate electricity, which will be sold to BPL for transmission and distribution. Both Power Co. and Terminal Co. are expected to be majority owned by Shell; current plans include the balance of the former held by BPL, and the latter by other Bahamian investors.”
While Mr Hector’s article indicated that BPL will hold the minority equity stake in the power plant, Dr Moxey yesterday reiterated that the Government still planned to make shares in the power plant available to Bahamian investors at some stage via an initial public offering (IPO).
Shell’s move in going public will again raise questions over whether negotiations with BPL and the Government have reached an impasse, and if a project billed as vital to improving economic competitiveness and household welfare through lower cost, more reliable and cleaner energy supply is in jeopardy.
The key documents will be the power purchase agreement (PPA), setting out the price at which BPL will buy electricity from Shell, and the asset purchase agreement detailing the price and mechanism by which the energy giant will acquire the power plant that the state-owned energy monopoly is currently building on its behalf.
The deal is still being structured in a manner that would see BPL finance construction completion of the new power plant at Clifton Pier, with Shell then purchasing a substantial ownership interest in the facility “at fair market price” from BPL.
This raised eyebrows when it was announced earlier this year, given that the original plan had been for Shell to construct, finance, own and operate the 220 Mega Watt (MW) plant as an independent power producer (IPP) that would enable BPL to exit the generation business and focus on transmission and distribution (T&D).
One source, speaking to Tribune Business on condition of anonymity, said the Government’s attention had been distracted from the proposed power plant deal by the financial fall-out from Hurricane Dorian and COVID-19.
They added that the delay to BPL’s $535m rate reduction bond (RRB) refinancing had also impacted the talks with Shell. The multinational energy giant, they suggested, was concerned that the delayed bond refinancing coupled with the inability of many BPL customers to pay their bills could impact the state-owned utility’s ability to pay it for the energy supplied.
The Government, though, was unlikely to provide a guarantee, creating a potential impasse. Tribune Business was also told that entities such as BISX-listed FOCOL Holdings and The Source River, the group formed by late Cabinet minister Tennyson Wells to acquire the former Bacardi plant, may be given an interest in the LNG terminal in exchange for some of their land holdings being used for its infrastructure.