By NEIL HARTNELL
Tribune Business Editor
A Bimini resort developer has revealed that its entrance into private power generation was largely financed by its liquefied natural gas (LNG) fuel supplier, New Fortress Energy.
RAV Bahamas, owned by Gerardo Capo and Genting’s Resorts World Bimini partner, disclosed in its responses to the Utilities Regulation and Competition Authority’s (URCA) consultation on the tariff review for public electricity suppliers that its power plant investment has been financed by “a non-traditional technique”.
“RAV commented that the company has financed the acquisition of its generating assets using a non-traditional technique,” URCA said in its statement of results. “The capital cost of the units is being financed by RAV’s fuel supplier and the cost is being recovered via an added component to the purchase price of the LNG supply.”
RAV Bahamas had voiced concern as to how URCA will account for such “non-traditional financing” in the revenue requirements for calculating an electricity supplier’s weighted average cost of capital (WACC). The regulator, in response, said it will employ a ‘cash needs’ approach in calculating the revenue needed to cover debt servicing costs when assessing such financing methods.
“When this approach is taken, investments financed from concessional loans are recovered through an annual debt service charge and not included in the rate base. Similarly, the capital cost of the units are being financed by RAV’s fuel supplier, and the cost is being recovered via an added component to the purchase price of the LNG supplier which will be considered for analysis to be included in the revenue requirement,” URCA added.
The late 2020 deal with New Fortress enables RAV Bahamas to act as a private power provider to the Resorts World hotel property, casino, and all facilities, homes and private villas. LNG tanks are filled at New Fortress’ plant in Miami, Florida, then shipped to Bimini.
On-site power generation capacity is roughly 9 Mega Watts (MW), with 7 MW from LNG and an additional 2 MW of diesel backup. Besides reducing fuel costs by 29 percent, the site has also reduced its carbon footprint by about 27 percent.
URCA, in summing up its tariff review findings, said: “The regulator’s stated methodology consists of estimating public electricity providers’ revenue requirements; determining a tariff that allows them to adequately recover the full cost of service; what portion of revenue must be collected from each respective customer class and ultimately designing a tariff that ensures that allocated revenue can be recovered for each of those classes. URCA intends to use this methodology moving forward to establish a transparent framework for future tariff adjustments and periodic reviews.
“As the regulator, URCA’s aim is to find the right balance between the interests of the consumers, utility providers and the Government. URCA’s tariff review function aims to protect consumers, ensuring they pay a just and reasonable amount for the services received whilst ensuring that utility providers charge only that which is necessary to cover all costs and receive a fair rate of return on their investment.”