By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government yesterday reassured New Providence landfill bidders it was open to a long-term deal, after some warned that five years made it “impossible” to generate sufficient returns.

Romauld Ferreira, minister of the environment and housing, told Tribune Business that the Minnis administration was willing to negotiate the duration of a public-private partnership (PPP) set at “five years” in the Expression of Interest (EoI) document.

Numerous potential bidders on the New Providence landfill contract had branded the seeming five-year management contract as “ludicrous” and “ridiculous”, arguing that it made bidding a “no go” because it was impossible to generate the necessary return on investment (ROI) given all the work required. They said it was especially prohibitive for groups with a waste-to-energy, or other renewable, component given that they would need a 20-25 year deal and power purchase agreement (PPA) with Bahamas Power & Light (BPL) to make their bids economically viable.

But Mr Ferreira, responding to Tribune Business’s inquiries from the Geospatial Data forum he is presently attending, reassured that the Minnis administration “fully understood” the need for bidders to make a profit and was open to negotiating a long-term management contract for the landfill.

“The five-year period is negotiable,” he replied. “Potential investors are completely unfettered with their technical and financial proposals. The Ministry of the Environment and Housing is fully cognisant of the need for a return on monetary investment and the implications of the same.”

Alarm bells had sounded among potential bidders over the ‘Contractual and Commercial Structure’ details in the EoI. They refer to a ‘concession agreement’ between the Ministry and winning bidder, setting out how the latter will redevelop the New Providence landfill “on a build, operate and transfer basis”.

The EoI added: “The terms of the Concession Agreement and the public-private partnership shall be for five years.... The Concession Agreement will also set out provisions governing the terms of the concession and the transfer of the facility upon the expiry of the investment term/termination of the Concession Agreement.”

Tribune Business sources close to potential bidders said there were also questions over who the New Providence landfill was to be transferred to after the five-year term implied, with most interpreting the EOI’s language to mean the Government.

They added that the five-year term was especially problematic given the extent of the work, and investment, required by the Government in the EoI. Besides operating the landfill, the successful bidder has to “finance waste management operations” and maintenance the site, while implementing remediation and mitigation strategies to prevent further fires.

“The potential investor will be responsible for the design, engineering, procurement, construction, testing, commissioning, operation, maintenance, permitting, insurance and financing of a new system at the site,” the EoI said.

“The concession agreement will set out commercial provisions to regulate the foregoing, including detailed payment mechanisms and the regime for deductions, penalties and compensation.”

Jean-Paul (JP) Michielsen, Stellar Waste-To-Energy’s chief executive, speaking ahead of the Minister’s comments to Tribune Business, said that when the five-year deal was combined with his group’s multi-million dollar investment and everything the Government was seeking, it was “practically impossible” to generate a return on investment.

“It’s impossible; you can’t,” he told Tribune Business, while suggesting that the five-year limit would be “open for discussion” - as Mr Ferreira confirmed. “It’s going to cost millions and millions of dollars, and you’re going to need a revenue stream against it.”

Waste-to-energy plants, such as that proposed by Stellar, typically require 20-25 year PPA’s with a utility provider to make them economically viable and encourage investors to part with their capital.

Praising the EoI as “very open-ended”, Mr Michielsen confirmed that Stellar will likely bid on the landfill contract, adding: “Everyone knows what we’re planning on doing.

“We’ll see where it goes. It’s been going on for some time now. They’re on the right track, the way they’ve presented it; it’s very open, and we’ll go from there.”

Another potential bid source, speaking on condition of anonymity, said a five-year deal would only make sense if the Government was seeking a pure management agreement using the present landfill equipment and no investment.

“Otherwise it’s a no go,” they told Tribune Business. “It’s ludicrous, ridiculous. You have to expend capital and recover the cost of that capital with revenue returns. Five years is far too short. It’s not consistent with anybody doing significant capital investments. All these things cost money. Whatever it is, five years cannot work.”

The source added that a high eight-figure sum, at minimum, was required to address all the New Providence landfill’s woes in a comprehensive fashion.

Another potential bidder, also speaking on condition of anonymity, added: “The only thing I found questionable was the timeframe. It’s a very short timeframe. My perception was we were being asked to do everything in five years and be ready to transfer.”

Mr Ferreira yesterday confirmed the Government had been advised by the Inter-American Development Bank (IDB) to hold the EoI as a pre-qualification stage, rather than go straight to the full Request for Proposal (RFP). Observers are interpreting this as a move to eliminate unqualified bidders at the earliest opportunity.

For the EoI gives a basic overview of the landfill’s multiple challenges, which include persistent fires; the absence of a barrier layer or cover for the top of the landfill; and “the absence of a proper leachate and gas collection systems”.

With ‘dry season’ now upon the Bahamas, the Government will be especially keen to ensure that a site generating between 800 to 1,500 tonnes of waste per day is remediated as rapidly as possible to prevent further fires.

Confirming that the landfill handles 80 per cent of the Bahamas’ total waste, with 70 per cent of its inflow generated by residential sources, the EoI said it has been receiving waste for more than 40 years.

Describing the landfill as “plagued with fires”, the EoI said an assessment of the site showed “substantial work was required to reduce the risk of fires and the potential for groundwater, surface water and air pollution.

“There seems to be an inherent problem with insufficient soil cover material on-site to limit or prevent air intrusion into the waste mass, which was one of the contributing factors to the sub-surface fires,” the document added.

“During the May 2016 site inspection, locations with an active smoke and burning smell were logged in all cells except the Engineered Lined Cell, where none was observed. Some areas showed significant subsidence or settlement, which was an indication of sub-surface fires.”

The EoI said only one of the landfill’s five cells had been “constructed in accordance with acceptable landfill construction practices”, while the cell for receiving construction and demolition waste contained mostly the household variety and was “not levelled and properly covered”.

“The leachate drainage pipe, designed to drain leachate from the cell to the leachate storage reservoir, was blocked either by previous fires or damaged by site equipment,” it added. “The leachate storage pond is not connected to the Engineered Cell.”