By YOURI KEMP
Tribune Business Reporter
Shell North America (NA) yesterday said it remains committed to sealing its energy partnership with Bahamas Power & Light (BPL) despite the deal being placed under review.
The multinational energy giant, in a short statement to Tribune Business, said: “Shell is committed to working with the Government to develop a reliable, affordable and cleaner source of electricity for the people of The Bahamas.”
Its comments came less than 24 hours after Alfred Sears QC, minister for works and utilities, reiterated that Shell’s liquefied natural gas (LNG) plant, fuel and power purchase agreement (PPA) with BPL, as well as the latter’s $535m rate reduction bond (RRB) refinancing, are receiving “priority review”.
Mr Sears said: “We’ll be organising a meeting, and it’s not just Shell North America; it’s really the RRB. BPL has been engaged over the past several months in putting together a major bond issue to raise several hundred millions of dollars. My understanding from the briefing is that it went to the Government in July and it was presented as an urgent matter, but did not get the approval.
“Here we are. They’ve come to us and they said this is urgent, we need the approval. Certainly you cannot commit the Bahamian people to acquire over a quarter of a billion dollar commitment unless we first inform ourselves, and satisfy ourselves, that this is a prudent investment.”
The $535m bond refinancing will generate proceeds that will enable BPL to upgrade its weakening transmission and distribution system, while paying off around $321m in existing debt. The funding may also be used to take care of BPL’s estimated $100m pension fund deficiency, and legacy environmental liabilities.
However, investors who purchase BPL’s bonds will have to be repaid by the electricity monopoly’s consumers via a new charge that will be added to their bills. This, BPL’s chairman previously said, would be a sum equivalent to 15 percent of their existing bills, and is likely to make any government nervous because of the likely social and political fallout.
Mr Sears, meanwhile, added: “In the Blueprint for Change, we have committed to diversifying the generation of power to include renewable and solar to at least 30 percent [of the country’s energy mix] by 2030.
“So we have to review that particular project [the bond] out of necessity because we don’t have the information.
“We’re just wrapping our heads around it.
“It’s been framed as an urgent matter, but in order to make a responsible decision we need to be properly briefed. We need to be convinced that it’s in the national interests of the country, so that’s basically an immediate issue we’re dealing with right now.”
The Shell North America deal would see the energy giant acquire from BPL some 225 megawatts (MW) of generation assets that have been built, or are due to shortly be constructed, at Clifton Pier. A liquefied natural gas (LNG) regasification terminal is to be located nearby to provide fuel to the plant, which would have sold electricity to BPL via a 20-25-year power purchase agreement (PPA).
Several sources, speaking on condition of anonymity, previously told Tribune Business that the Minnis administration felt Shell was charging BPL too high a price for the energy provided by the new power plant and wanted the rates to be lower.
It was also said to believe that the talks with the energy giant were dragging out too long and wanted to explore other options, especially after the exclusivity contained in Shell’s Memorandum of Understanding (MoU) with BPL expired in late 2020. However, the two sides have kept on talking.