Thursday, May 18, 2017
By NEIL HARTNELL
Tribune Business Editor
A former Cabinet minister yesterday slammed the former Christie administration as “dishonest” for claiming it had been responsible for lowering Bahamian energy prices by 40 per cent.
Phenton Neymour, who had ministerial responsibility for BEC between 2007-2012, told Tribune Business that the decline in energy prices had not resulted from government action, but had everything to do with lower fuel costs stemming from reduced global oil prices.
Philip Davis, the Opposition’s leader, yesterday touted the 40 per cent price reduction in laying out the details of the ‘deal’ with New Fortress Energy that was left behind by the former government.
“Over the past five years there has been a 40 per cent decrease in the cost of electricity to BPL consumers and the establishment of a new National Energy Policy,” the ex-deputy prime minister said.
The ‘40 per cent reduction’ claim was also highly publicised in the PLP’s general election campaign manifesto, but Mr Neymour blasted: “Mr Davis keeps saying the PLP government lowered the cost of electricity. That is dishonest.
“The Government did nothing. The fuel price produced that saving, and he needs to discontinue misleading the public in that regard.”
Mr Davis, in indicating that a draft ‘Heads of Terms’ had been left for the Hubert Minnis-led government’s consideration, confirmed Tribune Business’s revelation last week that the former administration had selected New Fortress Energy as its ‘preferred partner’ to reform energy generation in the Bahamas.
The Opposition leader’s statement likely revealed the headline terms most favourable to the former government, and not all details were disclosed, with Dr Minnis’s administration likely yet to review it.
However, apart from power generation, the deal appears to give New Fortress significant influence and control over both renewable energy and the refinancing of BEC’s successor, Bahamas Power & Light (BPL).
Mr Davis said the terms required New Fortress to construct new liquefied natural gas (LNG) storage and regasification terminals at Arawak Cay and in Freeport.
It will also, if approved, “design, develop and construct an LNG bunkering and transshipment hub” near Freeport. Under an associated bunkering license, Mr Davis said New Fortress will pay “incremental licensing fees of up to $7.5 million annually”.
Other requirements were said to involve New Fortress converting BPL’s existing oil-fuelled power generation facilities on Bimini, Abaco, Eleuthera and the Exumas to burn LNG.
Seemingly taking advantage of New Fortress’s parent, a $72 billion New York-based asset manager called Fortress Investment Group, the Christie administration also agreed that it could “lead and arrange” a $600 million rate reduction bond (RRB) to refinance BPL’s legacy debts and liabilities.
Mr Davis said the refinancing would “improve the Government’s debt-to-GDP ratio”, likely referring to the fact the RRB would replace some $240 million in loans guaranteed on BEC/BPL’s behalf.
However, Mr Neymour warned that BPL’s customers would receive an extra charge on their bills, which would represent monies required to pay debt servicing costs incurred by the RRB.
“The Bahamian people will be charged a bond fee to cover that $600 million,” he told Tribune Business. “In other words, the Bahamian people will be paying for that $600 million. That will be coming out of people’s bills.
“The Bahamian people, on their bill, will be paying VAT and a bond fee, and the bond fee is to cover the $600 million. The Bahamian must recognise they will pay for it at the end of the day.”
Should reform prove successful, the resulting reduction in energy costs should more than offset an extra charge to service the RRB, but Mr Neymour suggested it was disingenuous of Mr Davis to suggest that New Fortress will invest $10 million in a “smart grid power management system for the Bahamas”.
For in the next breath the ex-deputy prime minister said this $10 million would be “repaid with proceeds from the Rate Reduction Bond issuance” - meaning it will ultimately be financed by BPL’s customers.
The ‘deal’ with New Fortress also brought the company into renewable energy, where it is to partner with the Government to “establish a programme whereby it will sponsor qualified renewable energy projects of up to 25MW installed capacity in the Bahamas”.
“The Government will facilitate all necessary project development activities to support the company’s renewables sponsorship programme, including facilitating such projects and/or providing financeable offtake arrangements,” Mr Davis said of the proposed agreement’s contents.
“New Fortress Energy will work with the Government to develop a workforce optimisation plan (including by conducting an economic impact study) to maximise the employment opportunities of Bahamian citizens in the operation of the projects described herein.
“I am of the view that this proposed agreement is in the public interest and will prove to substantially move all Bahamians forward together.”
The new government’s approach is unclear, although an administration source said: “I’m sure there are benefits to it, although whether there’s a better deal is unclear.”
They added that the fixed LNG price and switch to a cleaner fuel were beneficial, along with the potential construction and full-time jobs that will be created by the LNG facilities, together with the possibility of new tax sources and reduced port costs.
However, energy industry sources again questioned whether the Government could have obtained a better off had it put the bid out to tender via a Request for Proposal (RFP), rather than invite selected offers in a late rush.
AES, the multi-billion dollar corporation and LNG supplier, last week hit out at the “last minute” nature of the process, this newspaper having been told that it was “a very weird” RFP.
Tribune Business also heard suggestions that bidders were invited to submit proposals on different terms and criteria, with some asked to detail how they would get fuel from Arawak Cay to Clifton Pier.
The new power plants in the New Fortress deal are supposed to be located at Blue Hills, where they are to reduce BPL’s own generation burden to 60 Mega Watts (MW) - valuable with Baha Mar coming on stream.
Tribune Business understands that PowerSecure was only given a five-year management contract so that the Government could keep its options open with regard to sourcing new generation capacity via independent power producers (IPPs) such as New Fortress.
However, New Fortress’s expertise does not like in the construction, operation and ownership of power plants, and questions have been raised over whether its Jamaica LNG deal has delivered the promised benefits.
New Fortress, which also has LNG assets in Florida, was founded by American billionaire, Wes Edens, a co-owner of the Milwaukee Bucks, a National Basketball Association (NBA) team.
Its parent, Fortress Investment Group, was earlier this year acquired by the Japanese group, Softbank, in a $3.3 billion deal.