Shell, New Fortress battle for BPL deal

Thursday, April 5, 2018

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

TWO liquefied natural gas (LNG) giants were yesterday said to be the front-runners for Bahamas Power & Light’s (BPL) generation contract, which has become “bogged down” in Cabinet.

Multiple Tribune Business sources familiar with developments said Shell Gas North America and New Fortress Energy were the main contenders for the energy supply contract, which will likely involve construction of a new LNG-fuelled power plant at Clifton Pier.

This newspaper was told that BPL’s Board and consultants had recommended Shell as the preferred bidder, but New Fortress’s offer had several qualities that were gaining traction among some ministers - hence the delayed Cabinet decision in awarding the contract.

The drawn-out wait yesterday prompted one source to suggest that the Minnis administration was little different from its PLP predecessor when it came to moving swiftly, and decisively, addressing the Bahamas’ long-standing energy woe - and its need for cheaper, more reliant power.

“They’ve been in office 11 months now, and this should have been dealt with in six,” one observer, speaking on condition of anonymity. “It’s bogged down. Nothing is fundamentally improved. We are still living off rental generation, and in a short while oil prices will go up and we will not have done anything to create any energy security in the country. It’s just more of the same.” Another added: “The process has been derailed. Whatever comes out now is the same old, same old.”

Desmond Bannister, minister of works, and Darnell Osborne, BPL’s chairman, both declined to confirm Shell’s selection as the preferred bidder when contacted by Tribune Business yesterday.

Mr Bannister, who has ministerial responsibility for BPL and was in the process of returning to the Bahamas from a holiday, pledged that approval of the winning bids would not take much longer.

“I suspect we’ll have that dealt with very shortly. That won’t be out there much longer,” he told Tribune Business. As for the Shell recommendation, he added: “I can’t confirm or deny that. It would be wrong for me to do that.... I’m sure you have very good sources.”

Mrs Osborne, meanwhile, suggested that BPL’s long-term refinancing via the proposed Rate Reduction Bond (RRB) offering was effectively “on hold” until the Government made a decision on the long-term generation contract.

“We made our recommendation to the Government, to the Cabinet and we’re waiting for the Prime Minister to make the announcement,” she said, indicating that the generation deal could determine how much funding is required through the RRB.

“Let’s just hope the Government can make the announcement soon, and once that’s made we can move forward,” Mrs Osborne added. “Right now, everything’s on hold, but the Board has certainly completed its work in terms of getting the ball rolling.”

BPL last year called for bids to supply it with 80 Mega Watts (MW) of short-term generation capacity for a five-year term, essentially seeking a better deal than it obtained from current provider, Aggreko.

However, BPL executives were quick to acknowledge that long-term generation offers were also welcome, and “modified” the process accordingly. Among the 19 bids received were those from Shell Gas and New Fortress, both of which are offering LNG-driven power plant solutions.

Tribune Business sources said BPL was “very keen on the solution offered by Shell, and the Board made a recommendation for Shell North America and an LNG plant at Clifton”.

However, one contact added: “New Fortress has a more complete solution, and has the ability to finance the entire project.”

New Fortress, the subsidiary of a multi-billion dollar New York asset manager founded by its principal, Wes Edens, was selected by the former Christie administration as its preferred energy reform partner in a highly-secretive process that was exposed by Tribune Business just before the 2017 election.

The group, which has already inked an LNG supply deal with Jamaica’s electricity supplier, Jamaica Public Service Company (JPS), is said to have merely dusted off its prior proposal, refined it and then resubmitted it under the new process.

And New Fortress also has some significant local partners, including BISX-listed Arawak Port Development Company (APD), the Nassau Container Port’s operator, and Bahamian investment advisory firm CFAL, formerly Colina Financial Advisors.

Mike Maura, APD’s chief executive, told Tribune Business earlier this year: “In an effort to participate in the Bahamas’ energy reform, APD has partnered with New Fortress Energy and CFAL in a tender to BPL to provide natural gas-fuelled power generation.

“The group believes that the new business opportunity provides a national benefit and shareholder value. The introduction of LNG to the Nassau Container Port provides a new revenue stream for APD, and offers new cold storage opportunities for local seafood and agriculture.

“The new business will add incremental income, which will serve to cover a portion of the port’s operating expenses, while reducing the risk to APD’s 11,000 shareholders stemming from a dependence on traditional cargo throughput, and introduce new investment opportunities for all Bahamians.”

Mr Maura did not provide further details on the APD-New Fortress-CFAL offer, although it will likely involve the development of an LNG storage/regasification terminal at the Arawak Cay port location.

New Fortress, as the fuel supplier, will likely ship the LNG to APD from its facilities in Florida. From there, the gas will likely be transported by pipeline from Arawak Cay to BPL’s Blue Hills power plant, where it will be used to drive the utility’s generation equipment.

New Fortress also recently agreed an LNG supply deal with Freeport-based Polymers International, which will see the latter use the fuel to run its boilers. Greg Ebelhar, Polymers’ chief operating officer, revealed that New Fortress was also interested in establishing an LNG terminal in Grand Bahama.

A key attraction of the Bahamas’ market for LNG suppliers, besides local power needs, is the possibility to provide fuel for the hundreds of cruise ships that ply this nation’s waters. Around 20- per cent of such vessels already use LNG, and more are expected to convert in the near future.

Tribune Business sources also suggested that Shell’s desire to secure the BPL fuel supply and long-term generation contract was motivated, at least in part, by a desire to stop New Fortress dominating the Caribbean LNG market.

The latter announced a $1 billion infrastructure investment in Jamaica in late 2017, which includes the construction of several power plants, and securing the Bahamas would give New Fortress a second - and one of the largest Caribbean markets - and the one that is closest to the US.

Shell Gas is largely a fuel supplier, not a power plant owner/operator, and this newspaper understands that it has already reached out to other BPL bidders for potential assistance with these aspects should it win.

Comments

Bahamianbychoice says...

What I find odd... is a highly competent Board and consultants BOTH have recommended Shell. Why is New Fortress even being considered at cabinet level? I am sure their bid was reviewed by the board/consultants already..how they jump the line up to cabinet level! Who at Cabinet level is QUALIFIED to even review/understand these bids? Is there anyone??

I hope they also check how New Fortress has handled Jamaica. I heard they made all kinds of promises and I believe the cost of power is actually now more expensive. I believe Shell won the bid in Jamaica originally as well.....then New Fortress "mysteriously" was awarded the contract..pleassse.....I hope that none of the present sitting Cabinet Ministers have any special interests. New Fortress is owned by hedge fund persons...and we know how that goes..payoffs. Doesn't New Fortress own Tropical..which has shares in the Port and now connections to CFAL? Not sure..all sounds abit sketchy....Also this claim they will provide additional financing...that is no favour..what are the strings attached for that!! I would like to know. Shells owns LNG..NF would have to buy.

Also why run a pipeline from the Port through high density areas to Blue Hill Power Plant...isn't that dangerous?? The Port is so close to downtown and the cruise ships....tourists in general. I am not an expert...just doesn't seem sensible. Shell suggestion to use Clifton Pier seems a better fit. Mind you...being close to the cruise ships may be the bigger plan as I believe all cruise ships are changing over to LNG and doesn't the Bahamas hold one of the largest ship registries?

My hope is Cabinet will make the right decision for the Bahamian people..not for any special interest groups. The Bahamian people need a break!!!! Will be interested to see how this turns out.

Posted 5 April 2018, 4:41 p.m. Suggest removal

sheeprunner12 says...

Do I smell a kickbacks rat??????? ........... Five years from now ............... Audit????

Posted 5 April 2018, 5:08 p.m. Suggest removal

Voltaire says...

@Bahamianbychoice – highly competent consultants??? BOL you must be joking. Christie those were famous for using consultants who accepted the filthy lucre and said whatever the government required. Rubis spill which poisoned God knows how many people, Bimini cruise terminal that ruined the environment only to fall into disuse within months, etc, etc etc. And lo and behold, the Shell bid that those “highly competent” consultants recommended will benefit the PLP cronies of FOCOL and no one else. These are precisely the people who have been shamelessly polluting at Clifton for decades with no consequences and with their political yes-boys and armies of “consultants” protecting them. Meanwhile, their bid calls for an LNG plant at Clifton Pier, which quite obviously should instead be closed and cleaned up before it poisons the surrounding environment beyond rescue.

Posted 6 April 2018, 12:47 a.m. Suggest removal

When it comes to your "Fortress may have connections, not sure, all sounds a bit sketchy" nonsense, you are clearly just trying to muddy the waters based on no evidence at all. Who you workin for Bahamianbychoice? Try and get your facts straight. Just a year after delivering LNG to Jamaica, New Fortress is getting a new BILLION dollar contract to expand services. If electricity costs went up, why are the Jamaican people and government so willing to invest heavily in this company? You are clearly spouting poisoned foolishness based on an agenda. Shell and its cohorts have made a toxic mess out of the Clifton area. They have shown zero desire to rectify the mess they have made, and BPL is clearly unable or unwilling to do so either. As I understand it, New Fortress will actually pay for the clean up. If that is the case, this deal is a no-brainer and any Bahamian who cares about preserving the country's natural heritage for the benefit of future generations will tell Shell to roll out.

Posted 6 April 2018, 12:57 a.m. Suggest removal

I agree the PLP consultants were same ones that caused chaos in many areas....and the same ones that recommended this NF without proper research. If you remember they tried to rush to have the contract signed prior to the election. I doubt any investment by NF in Jamaica benefits the people..at this point they pay higher prices and are locked in so who will the investment benefit...Jamaica or NF and for what purpose?

Is FOCOL involved/same as Shell NA or are you assuming.

I am questioning how the BPL board AND consutlants have both made a recommendation for the same company after completing an extensive review i am guessing of multiple bids..yet somehow NF ends up at Cabinet level...along with the recommended company..no others...just NF. I find that unusual and again question who is qualified to review those bids..is there any power engineers sitting in Cabinet?

My only agenda is to encourage persons to do their research...ask questions and dont be swayed by smoke and mirrors ..of any company offering to pay...that always comes with strings! Something that sounds too good to be true usually is.

I totally agree this is a very important decision for the country that will affect future generations...be informed with accurate information. Ask questions..

Posted 6 April 2018, 4:07 a.m. Suggest removal

My hope is also that an independant review/audit of the process to choose the final company will/has been done..ensures fairness and transparency for the Bahamian people regarding such a critical decision.

Posted 6 April 2018, 4:39 a.m. Suggest removal

Transparency is important, agreed. Still I don't understand what you are saying now regarding PLP consultants recommending NF. At the start, you that "a highly competent Board and consultants BOTH have recommended Shell". The public should be able to see and understand both plans, sure, but I see no reason to automatically assume the NF plan is a bad one, or that Jamaica has been poorly served through this partnership. Just take it from the private sector in the form of Red Stripe Beer:

"Back in August 2015, New Fortress Energy signed a contract with JPS to deliver LNG to supply gas for its LNG powered plants in Bogue, Montego Bay and now the new plant at Old Harbour. In addition to the power sector, manufacturers are also going the route of LNG. Red Stripe, a beer manufacturer, estimates that conversion to gas to power its brewery operations will lead to savings of more than US$336,000 per year. According to the brewery, the project is expected to reduce greenhouse gas emissions by approximately 6,000 tonnes per annum. Gas will power Red Stripe's combined heat and power plant, boosting output by over 50 per cent. According to the Gleaner, Ricardo Nuncio, Red Stripe Managing Director, said that, ‘The sustainability and operational capabilities that are made possible by LNG make our partnership with New Fortress Energy a win for the environment and our business.’ "Red Stripe continues to focus on changing the way we operate throughout the entire supply chain so that we can deliver on our commitment to making a positive environmental impact," he said."

And yes, Shell Bahamas is definitely operated by Freeport Oil Company (FOCOL).

Posted 6 April 2018, 7:44 a.m. Suggest removal

My main goal is that I am unsure as to why after what I perceive as a competent BPL Board and an independent consulting firm both determined Shell to be the best fit and both recommended this to Cabinet. However, out of all the bids only NF is also being considered up and above the recommendations of professionals in the energy field. Who in Cabinet is qualified to evaluate such bids? How did NF even reach Cabinet if they were not recommended..by either the BPL Board or industry consultants.

Re Jamaica ...the personal monthly costs are still a struggle for the local ..that has not changed. Any company that introduces LNG will reduce the carbon footprint..its the door to door costs that need to be carefully studied as Jamaican's have not enjoyed the cost savings as promised.

I agree Shell Bahamas is operated by FOCOL but this is Shell NA which I doubt very much includes FOCOL in anyway.

Posted 6 April 2018, 10:03 a.m. Suggest removal

Ok I hear you. My response would be that 1. Both the board and the consultants were nothing more than rubber stamps for whatever that Christie cabinet wanted to do. 2. I know for a fact that FOCOL is all up in this, and that explains precisely why - coincidence, coincidence - Christie's boys got the recommendation in the first place. I see the decision to reconsider the contract as an effort to correct the original nepotism and find out which is really the best option. I think it is a good move.

Posted 6 April 2018, 12:14 p.m. Suggest removal

The Christie administration recommended NF and tried to sign a contract prior to the last election but was stopped if I remember correctly.

This new BPL board and new consultants began a new RFP and concluded Shell NA is the best fit. If this story is accurate why then is Cabinet considering another company that what not chosen by industry experts through a proper RFP vetting process. I am sure NF submitted a bid. It would be interesting to know what exempts them from the process to be considered at Cabinet..if that is correct. Is it because of the connection with the APD? Not sure. Either way, seems inappropriate.

Posted 6 April 2018, 2:22 p.m. Suggest removal

proudloudandfnm says...

ADP in the new cruise port. ADP in the BPL deal.

They already own a huge monopoly now they want two more?

Say what?

Posted 6 April 2018, 7:24 p.m. Suggest removal

TalRussell says...

I know, or at least my trusted inner circle sources are saying, who the main living much easier since 10th May 2017 pusher in Imperial red cabinet is who is most willing dance with advancing yet another the UBP style monopoly devil between da APD and BPL. Tell me something - even if the reds tried harder - does you thinks it would be possible these red man's be any more UBPism deal making friendly?

Posted 8 April 2018, 10:30 a.m. Suggest removal