Shell deal still ‘very much live’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday asserted that the deal for Shell’s new power plant “is very much live” despite Bahamas Power & Light (BPL) seemingly making a $70m investment on its behalf.

Desmond Bannister, minister of works, told Tribune Business that BPL’s part-use of the proceeds from its upcoming $650m bond issue to purchase more Wartsila engines was go ensure the utility can “move ahead no matter what the circumstances”.

“The Shell deal is very much live,” he said. “I want to make sure no matter what, in any circumstances BPL is prepared to move ahead. I don’t want to say anything more than that.”

Mr Bannister was responding after Tribune Business and others queried why there was little to no mention of the much-touted Shell multi-fuel power plant, which has been portrayed as key to solving New Providence’s energy reliability and cost challenges when it comes online in late 2021/early 2022, in his House of Assembly presentation on BPL’s $650m bond refinancing.

The minister’s presentation shows that $70m of the $650m to be raised through the bond has been earmarked for the Phase II expansion of Clifton Pier’s “Station A” with the purchase of more generation engines from Wartsila.

This 90 Mega Watts (MW) of additional capacity, when combined with the existing 132 MW set to come online in mid-December, will provide 222 MW in new generation - exactly what Shell North America is supposed to provide with its new-multi fuel power plant.

Indeed, Chester Cooper, the Opposition’s deputy leader and finance spokesman, told the House of Assembly: “Today, I don’t know if he [Mr Bannister] said Shell once. The Memorandum of Understanding was signed with Shell in December 2018. Now, the Bahamian people must pay without any mention of Shell.”

And one well-placed source, speaking on condition of anonymity, told Tribune Business: “I don’t understand why they’re [BPL] funding this when Shell is supposed to be doing it. And how can you give Wartsila a contract for that amount of money when it has not gone out to tender.”

Mr Bannister, meanwhile, said he had been “trying to give people a general idea” of the impact BPL’s refinancing will have on their electricity bills when he said the average household was likely to see a $230-$30 increase over a 10-month period next year when the debt servicing fee kicks in. This is despite the fact, which he agreed, that the bond has not yet been priced or structured.

As for whether the bond servicing fee will be a flat levy or percentage of the bill, the minister pointed Tribune Business to the Electricity Rate Reduction Bond Bill 2019 which refers to it being calculated based on a customer’s “estimated kilowatts per hour use” - indicating bigger energy consumers will pay more.

Mr Bannister said the former Christie administration had been exploring a two-tiered debt servicing fee for the BPL bond, whereby small residential consumers would pay a lower rate and be subsidised by business users - a proposal that was shut down by the private sector.

“The Prime Minister addressed that very clearly,” Mr Bannister said. “The larger companies indicated the country would be shut down as there was no benefit for them. As a result, former Prime Minister Christie agreed and withdrew any discussion of that issue.”

The minister said the refinancing, which will leave BPL with $222m for infrastructure improvements, “is going to be the first time it will have the wherewithal to make any kind of investment without coming to the Government”.

He added: “BPL was created with debt, they were incorporated with debt. They’ve never been debt free. They were created with no chance to succeed. This is going to be their first opportunity to succeed and do anything for themselves.

“It’s a wonderful opportunity. The Government is looking forward to BPL stepping up on its own, and doing what it has to do, and seeing how it transforms the country, the structure of power, the generation of power, the transmission of power.”