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Bpl’S Shell Deal Process ‘Oblique’

• Utility’s then-chief operating officer challenged ‘fairness’

• And EY found ‘deviations from best tendering practices’

• New report backs concerns aired to this paper in 2018

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light’s (BPL) efforts to outsource electricity generation on New Providence were “oblique” and not fully transparent over a deal ultimately won by Shell North America.

A report by international consultants, commissioned by the Prime Minister’s Office under the Minnis administration, reveals that even BPL’s then-chief operating officer “questioned the transparency and fairness” of a process that resulted in the multinational energy giant’s North American arm winning the contract to install 220 Mega Watts (MW) in new generation capacity.

The FTI Consulting report, which has been seen by Tribune Business, also found that an earlier review by the EY (Ernst & Young) accounting firm detected “several deviations from best tendering practices” in how a process that attracted 19 total bids was handled.

However, it was unable to find any evidence to support assertions that BPL’s former chairman, Darnell Osborne, had objected to signing-off on the Shell deal prior to its terms being reviewed by outside attorneys. FTI Consulting said this was not supported by Board minutes, while other directors at the time could not recall her making such a request.

The report’s conclusions appeared to give BPL the benefit of the doubt over the Shell North America contract award, noting that the state-owned energy monopoly had made “proactive attempts at transparency” by hiring a third-party evaluator to assess the offers received as well as holding a public bid opening ceremony.

And it also noted assertions by ex-prime minister, Dr Hubert Minnis, and BPL’s chief executive, Whitney Heastie, that the shortcomings identified by EY would not have affected the bid outcome even though the accounting firm “did not address the question of whether the award to Shell was proper”.

Nor did FTI Consulting, even though its findings showed that concerns detailed by Tribune Business reports in April 2018 were spot on. This was a crucial deal for BPL and the Government to get right, since at that time it involved outsourcing New Providence’s baseload electricity generation to a private provider for a 20-25 year period.

“A key area of criticism related to the lack of clarity over what kind of generation proposals BPL would entertain, with some tender participants confused as to how Shell was ultimately selected for a 220 MW plant following a tender ostensibly for 80 MW of rental generation,” the report said.

“The tender documentation shows that BPL did indicate a willingness to consider alternative proposals, but did not do so plainly and prominently. Instead, this was indicated obliquely in addenda and responses to questions from bid participants.

“EY found that seven of the 19 bids received by BPL reflected multiple options, each with long and short-term generation options or, in some cases, multiple alternatives for each. This indicates an understanding, at least among some vendors, that BPL was open to considering proposals of different varieties.”

FTI Consulting’s report makes clear just 37 percent of bidders were seemingly aware that they could offer a variety of options, yet is silent on further findings or recommendations despite the fact that more than half the participants were apparently in the dark on this.

Tribune Business, on April 12, 2018, revealed the concerns among some participants over the structure of the bidding process itself. This was especially since BPL initially went out to tender for two contracts, fuel supply and the provision of 80 MW of short-term generation for a five-year period.

Recognising that the latter was not a practical solution for BPL, many bidders also supplied a long-term generation proposal as a result. As a result, several sources said BPL and its Canadian consultants, Sancon Contracting, ended up having to compare “apples with oranges” as some bidders offered only on short-term generation, others on long-term, and the remainder a combination of both.

“What I don’t understand is that the original BPL RFP in November called for two things: Fuel supply and 80 MW of temporary generation,” one source said at the time. “None of which are in this award. It had nothing to do with an LNG plant. If everything was evaluated on an apples for apples basis, I think it would have been a different outcome.”

Several bidder sources suggested the tender had evolved from “a generation RFP to an LNG RFP”, and one added back in 2018: “The process was not clear to everybody. They asked the bidders for a five-year proposal on 80 MW of rental generation.

“Some people bid on five years, some people did long-term and some did both. It wasn’t exactly clear what they needed to compare apples with apples.” The source described the different durations for short and long-term generation as “a major, major flaw” given that those submitting 20-year proposals could offer much lower rates, and better financial terms, than their short-term counterparts.

Concerns were not confined to participants. “Several sources questioned the transparency and fairness of the tender process, including BPL’s former chief operating officer, Christina Alstom,” FTI Consulting’s report revealed.

“Heastie told FTI that while the tender could have been handled better, BPL took proactive steps to ensure fairness and transparency. These included hiring a third party to independently evaluate bids and hosting a public bid opening ceremony attended by bidders and members of the press.

“After the award to Shell, the Office of the Prime Minister engaged EY to examine BPL’s tender process. FTI reviewed EY’s report and found that while it noted several deviations from tendering best practices, it refrained from comment on the propriety of the award to Shell,” the document continued.

“Prime Minister Hubert Minnis was quoted in the press as saying that EY had found minor irregularities, but none that would have changed the outcome of the bidding. Heastie made a similar comment to FTI.”

The FTI Consulting Report, though, said there was nothing to support suggestions that Mrs Osborne had objected to the deal while BPL chair. “Osborne reportedly objected to entering into a contract with Shell prior to a review by outside counsel,” the document added.

“In interviews with FTI, neither Heastie nor [Ferron] Bethell recalled Osborne ever requesting that outside counsel review a contract or Memorandum of Understanding (MoU) with Shell, although both confirmed that the entire Board reviewed it, including Osborne as well as Bethell, who is a lawyer by trade. Further, FTI’s review of BPL Board minutes found no indication Osborne voiced objections on the issue.”

It is unclear whether Shell North America will still be responsible for taking over the new 220 MW of generation capacity, and supplying BPL via a power purchase agreement (PPA), or if its interest will be restricted to supplying liquefied natural gas (LNG) as the plant’s primary fuel from a $270m facility proposed to be constructed at Clifton Pier.

The newly-elected Davis administration must now decide whether to pursue negotiations with Shell North America to a conclusion after the latter was unable to seal the deal with its predecessor. It is thought that completion of an agreement is linked to BPL successfully concluding its mammoth $535m rate reduction bond refinancing, which is also under review by the Government.

Mr Bethell QC, senior partner at Harry B Sands, Lobosky & Company as well as a BPL director, indicated to FTI Consulting that the former government and Board might be “rethinking” selling the power plants to Shell “and whether it is in the best interest of the Bahamian public to do so”.

“Bethell expressed a personal belief that BPL should own a majority of the power station, the land and the jetties yet to be constructed,” the report added. “BPL ownership, he argued, would allow The Bahamas to take advantage of the large number of LNG-powered cruise ships that pass New Providence and could refuel at Clifton Pier. Such a refuelling business could be lucrative for BPL.”

With the BPL Board about to change, such views could well be moot. However, the state-owned energy monopoly yesterday pushed back against the “erroneous assertion” that current chairman, Dr Donovan Moxey, had signed a $1.3m purchase order without wider Board approval. It added that it had provided all the necessary papers to FTI Consulting showing proper procedure was followed. 

Comments

The_Oracle 1 month, 1 week ago

Chasing their tails endlessly, the rats on the sinking ship didn't notice the water rising..... The errant thought processes are astounding.

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JohnQ 1 month, 1 week ago

Shell North America is a leader in providing safe, clean and reliable LNG facilities to a broad spectrum of customers. BPL and it's "owners" the Bahamian Government, would be wise to rapidly move forward with the LNG terminal and related natural gas generating capacity. This is a no brainer. Wake up BPL customers, demand that this process moves swiftly forward.

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tribanon 1 month, 1 week ago

You sound very much like a paid endorser of Shell North America. LMAO

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ThisIsOurs 1 month, 1 week ago

"However, it was unable to find any evidence to support assertions that BPL’s former chairman, Darnell Osborne, had objected to signing-off on the Shell deal prior to its terms being reviewed by outside attorneys"

these the same people who say they didnt speak to Mrs Osbourne?

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tribanon 1 month, 1 week ago

The level of corruption here involving certain of the named BPL board members, Shell North America, FTI Consulting and others is nothing short of flabbergasting.

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Bahamianbychoice 1 month, 1 week ago

How can a consulting firm determine if due diligence regarding the RFP process took place without speaking to any of the technical team involved, reviewing all of the bids involved, or speaking to the former Directors. This consulting team seems to only have spoken with the same people, who they also determined were not following proper processes. Shell NA is quite reputable and more than able to handle the unique needs of this country. They do not need management to source engines on their behalf. Especially persons whose skill set include chemical engineering, so I hear, and another who has the equivalent of engineering diploma or a local lawyer.

I say again stop with the smoke and mirrors and look closely why they diverted from the original approved RFP, which was approved by Cabinet..why they spent loaned money again bank covenants. Stop accepting foolishness from this report and begin to see what exactly has happened. There is no way a proper forensic review would choose not to interview key persons involved. I also go back to the question I read in the Guardian today which was, is the present Board even ratified? If they are not why did they make these type of massive investments and on whose authority?

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Dawes 1 month, 1 week ago

And all along the Bahamian people still are lumped with a power company that charges very high fees and yet can't keep power on. They have known for a long time we needed major changes at BPL, but as the gravy train was so great they just dragged on any changes until Government changes, as they know they can then go through the whole process again.

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