Friday, April 13, 2018
By NEIL HARTNELL
Tribune Business Editor
SHELL’S selection was yesterday described as another step in “revolutionising” Bahamas Power & Light (BPL), as the utility looks to close its short-term financing “within weeks”.
Darnell Osborne, BPL’s chairman, declined to provide further details on the deal on the grounds that BPL now has to finalise the contract with the winning generation bidder.
Given the detailed bid submissions already supplied by Shell North America, Mrs Osborne said the contract completion “should be fairly straightforward” as she confirmed that the energy supplier/trader will now put together the consortium for developing the 270 Mega Watt (MW) liquefied natural gas (LNG) plant at Clifton Pier. “They are not builders of plants, so a plant builder will be selected and we go from there,” Mrs Osborne said. While rival bidders had previously questioned Shell’s suitability for the BPL deal because it is not a builder, operator and owner of power plants, some had yesterday muted their criticism in recognition that it has the financial muscle to ‘buy’ the necessary expertise.
“Shell is a legitimate major fuel supplier,” one source told Tribune Business on condition of anonymity. “They have the balance sheet and capability to do this type of project. They’re a global player, they have the balance sheet and certainly have the wherewithal.”
Mrs Osborne said BPL would have to approve Shell’s selection of power plant contractor, but said the long-term generation agreement - approved this week by the Minnis Cabinet - was just one of many steps taken by the current Board to lower energy costs and improve reliability for Bahamian consumers.
“The Board felt this was the best way forward in terms of ensuring future reliability and reduced energy costs,” she told Tribune Business of Shell’s selection. “When we [the Board] took over in July, our sole focus would have been on ensuring, in the shortest possible time, that businesses and residents would have been able to see more reliable power and reductions to lower the cost.”
With the new LNG-fuelled power plant just one component of this plan, Mrs Osborne added: “There are other things we have been doing since July to ensure the systems in BPL save money.
“There are other things we have been doing to bring down the cost. Some of those are staffing issues, some involve changing the procurement process to bring it closer to international best practices for the benefit of the Bahamian people. This [the Shell deal] is another step. It’s another piece in the puzzle, and we’re closer to a solution.”
The BPL chairman said the Board had also concentrated on “reducing the wastage and making people more accountable”, the latter of which has involved changes to the utility’s management in Abaco following the recent lengthy outages caused when the last remaining water pump at the Wilson City plant broke down.
Procurement reforms are estimated to have generated $10 million in savings to-date, and Mrs Osborne confirmed that Shell’s selection will pave the way for other essential reforms, including BPL’s long-term debt refinancing and re-negotiation of its short-term generation deal with Aggreko.
“As a Board, we try to get the best value for the Bahamian people,” she told Tribune Business. “I’m an accountant by profession, so that is how I think. I run my own businesses, and try and get the best value for my dollar. That’s how I treat, and the Board as well as we’re mostly businessmen.
“We are trying to get the best value for the Bahamian people’s dollar. We are all experiencing the effects of high energy costs and unreliability. We feel it every day, just like every Bahamian.”
Mrs Osborne said BPL hoped to tie down the $100 million in short-term financing from the Credit Suisse-led lending syndicate within weeks, with the latter awaiting a finalised business plan and other information from the utility.
“We’re almost there,” she told Tribune Business. “We’re finalising some of the business plan and tying up loose ends. Then we should be in a position to receive the money within a few weeks. They’re [the syndicate] really waiting on information from us right now.”
Mrs Osborne reiterated that BPL will turn its attention to refinancing its long-term debt, including the unfunded pension deficit and other liabilities, once the short-term funding “is behind us and complete”.
She confirmed that BPL will raise the necessary capital via a Rate Reduction Bond (RRB) issue that it hopes to place with investors before year-end 2018 “if at all possible”.
“That’s what we’re working towards,” Mrs Osborne said. “I think the long-term financing should not be a problem. The legacy debt has to be dealt with; it’s not going anywhere. We have to address that, and we intend to address it with the Rate Reduction Bond.”
She added that BPL’s Board had also been working with an international consultant that was carrying out a study of the utility’s rates.