The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light (BPL) enjoyed a near-$50m equity gain on its ‘Station A’ investment, the Opposition’s leader charged yesterday, slamming accusations of cost overruns as a “misrepresentation”.

Michael Pintard, in a statement, said this balance sheet improvement occurred because BPL’s new power plant cost around 35 percent less than similar-sized stations elsewhere in the Caribbean. For an outlay of around $98m, he argued that the state-owned utility - and its New Providence household and business consumers - had obtained a baseload generation plant that would typically have cost $145m.

“All totalled, including civil works, Station A costs about $98m and has a capacity of 132 MW (mega watts). This gives an average cost per megawatt of $742,424,” the Free National Movement’s (FNM) leader asserted.

“After completion, a cost comparison was performed for Station A as compared to other Caribbean island power plants, and it was determined that on average other Caribbean plants were constructed for $1.1m per MW. This gave Station A a valuation of about $145m, with additional equity realised by BPL on its balance sheet of about $50m. BPL built Station A at a 35 percent reduced cost over similar-sized power plants.”

Mr Pintard’s statement came as he defended the decisions of the Minnis administration, in which he served as a Cabinet minister, against allegations that the project to house the seven Wartsila engines in Clifton Pier’s ‘Station A’ had to-date incurred $21m in “cost overruns” that are continuing to mount.

Jobeth Coleby-Davis, minister of transport and energy, in disclosing a review of ‘Station A’ dated July 30 this year, argued that the $117.9m spent on ‘Station A’ “to-date” represents a $21m “overrun” on the initial $96.9m budget allocated under the Minnis administration. In percentage terms, this alleged “overrun” is around 21.7 percent.

However, Mr Pintard yesterday slammed this as “a misrepresentation” because the $117.9m figure includes ongoing costs and expenses incurred after the initial outlay to acquire, install and bring the seven Wartsila engines online - a sum he pegged at $98m. The Opposition leader demanded that the Government provide a breakdown of the costs, and when they were incurred, to substantiate its allegations.

“They are misrepresenting that,” Mr Pintard told Tribune Business of the “cost overrun” accusations. “One of the things we challenge them to is to lay the documents in the House outlining the cost overruns. We don’t believe they’re prepared to break that down. It’s a misrepresentation.”

The dates in the report, by BPL chief executive Shevonn Cambridge, signal that at least some of the $117.9m relates to expenses incurred after the Minnis administration was voted out of office in September 2021 because they refer to the year 2022. And the report’s use of the term “to-date” indicates that ongoing expenses are included in the $117.9m figure because it comprises all costs up to end-July this year.

The report said the $117.9m figure was broken down into $108.3m for the seven Wartsila engines and their “auxiliary” support infrastructure “through 2022”; $7.5m in expenses related to the “dismounting of Station A”; and $2.1m of repairs that remain ongoing to fix the building’s structure and prevent concrete spalling.

Mr Pintard, meanwhile, alleged to this newspaper that the Davis administration released the ‘Station A’ review in a bid to deflect blame away from itself over BPL’s sky-high light bills. He argued it was seeking to distract the public from its failure to continue BPL’s fuel hedging strategy, which the Opposition has repeatedly identified as causing these soaring electricity costs, and pin the blame on the previous government.

“The Government is attempting to spin this story,” the FNM leader said. “We believe it’s the case that the Government is facing a backlash from both residents and businesses that are justifiably outraged with increasing prices and the lack of government answers as to how they will bring those prices down without causing hardship.

“No amount of deflection is going to confuse the public about what caused the high bills they currently have. The public is not buying that argument. I believe the public is so angry with these costs that their advisers have told them they have to find a way to spin this story, and they will go to great lengths to spin this matter. They are looking at every angle to explain how we got here.

“They know the decision [over the fuel hedge] was bad, and rather than confess and move on, and come up with a strategic plan, this all about cloak and daggers.” Mr Cambridge’s report challenged some of the decisions by the former BPL Board and management over the supporting infrastructure provided for the Wartsila engines, as well as the decision to house them in ‘Station A’ given the concrete “spalling” issues.

However, Mr Pintard said both the then-BPL Board and management were aware of these issues and the need for further investment to address them. “BPL knew that additional work needed to be done to the building façade and roof of Station A. However, this work was secondary to getting the power plant up and running,” he added.

The Opposition leader yesterday renewed his call for the Davis administration to unveil a “comprehensive strategy” for addressing all BPL’s woes, including legacy debt that was pegged at $320m-plus; its aging transmission and distribution infrastructure; pension plan deficit and environmental liabilities.

“The Government has still not articulated a comprehensive programme as to how they will deal with a range of issues. It’s absolutely crucial they do that,” Mr Pintard told this newspaper. “What we need is a long-term solution. That’s the only way the fuel charge is going to climb down from 27.6 cents per kilowatt hour to try and get back down to around the 10.5 cents they met in place.

“And even lower to eight to nine cents. That was discussed by the Board prior to the election; that we would be headed in that direction once LNG came online. We’ve been saying consistently that the Government needs to find a sustainable solution. The former Board and management did a commendable job regarding a deal and formula that would pay dividends in the long-term generation of power at an economical rate.”

The “deal” that Mr Pintard referred to was the negotiations with Shell North America to take over New Providence’s baseload generation via a 20-25 year power purchase agreement (PPA). The latter would have incorporated ‘Station A’ and the Wartsila engines into its new power plant, which would have been supplied with LNG via a newly-constructed regasification terminal.

This newspaper understands that terms had largely been agreed with Shell when the Government changed hands in September 2021. The deal has gone into abeyance ever since, with little to nothing heard of it.

Mr Pintard also conceded that, with global interest rates having increased to fight inflation, both the Minnis administration and current government “missed the window” to launch BPL’s mammoth $535m refinancing via the planned Rate Reduction Bond (RRB) as the costs this will impose on household and business consumers have risen sharply as a result.

“The Government has to take another look at what was left in place,” he argued.