By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A US firm, which abruptly abandoned a $1m legal claim against the Government, said the mandate to relinquish 50 percent ownership to Bahamians made it “impossible for foreign investors” to bid on a solar tender.

Jessica Quintana, an attorney representing Florida-based Burke Energy, told the Ministry of Energy and Transport’s permanent secretary in an August 16, 2024, letter that it was unfair to expect overseas bidders to give up 50 percent ownership after they had obtained all the financing necessary to construct the renewable energy plant.  

Responding to the Government’s invitation to enter a competitive bidding process to provide solar energy on Cat Island, where rival offers would be entertained, she told Donella Bodie: “Upon reviewing the RFP, it is evident that the terms are impossible for a foreign investor to comply with, including the requirement to relinquish 50 percent ownership of the plant after providing 100 percent of the financing for its construction.”

Mandating significant Bahamian ownership in solar and other renewable energy projects was a key feature of the requests for proposal (RFP) issued by the Government in late 2023 and early 2024 for utility-scale generation on both New Providence and the Family Islands.

The Government asked bidders to “consider” how majority Bahamian equity ownership of their solar energy projects can be achieved within three years. The tender document also stipulated that a “minimum” 40 percent of all profits go to Bahamian shareholders.

“A key project element that is being sought is that of Bahamian ownership,” the renewable energy RFP stated. “In this vein, it is anticipated that the selected respondent’s proposals will be subject to a build, operate and transfer arrangement.

“Additionally, it is important to the Government of The Bahamas that every Bahamian has an opportunity to benefit from implementing these projects. Therefore, consideration must be given to how a minimum of 51 percent Bahamian ownership would be achieved within three years with a minimum of 40 percent of the profit being disbursed to these equity holders.”

The Davis administration made clear that Bahamian ownership will give bidders a distinct advantage, with the bid documents adding: “To avoid doubt, Bahamian-owned respondents will receive preference during the RFP scoring process.”

Burke Energy, though, appeared to feel it was unfair that itself and other overseas investors had to do all the work to win the bid and then hand over half-ownership in their project to Bahamians who may have done nothing and brought little value to the enterprise.

The exchange occurred after the Government rejected Burke Energy’s utility-scale solar design for Cat Island, Prime Minister Philip Davis KC’s constituency, which was submitted as part of the US company’s obligations under a Letter of Intent (LOI) it signed with the Government in December 2022. The proposal was thus not part of any competitive bidding process, unlike that for used for most other Family Islands.

Documents filed with the south Florida court by Burke Energy reveal the Government’s reservations with its proposal. Besides wanting it to switch from diesel to liquefied petroleum gas (LP), and thus offer a cleaner fuel for back-up generation, the Davis administration also voiced concerns over an all-in price that appeared to be 52.8 percent higher than BPL’s summer 2023 costs when the fuel charge was at its peak.

Christina Alston, now-Bahamas Power & Light (BPL) chair but then ‘director of energy and sustainability initiatives’ in the Prime Minister’s Office, told Burke Energy in an April 2, 2024, e-mail: “After careful consideration, we must address a significant concern regarding the power purchase agreement (PPA) pricing outlined in your proposal.

“As it stands, the all-in price of $0.6263 per KWh (per kilowatt hour), with fuel price estimates at $0.2139 per kWh, resulting in an effective price of $0.4124 per kWh, considerably exceeds the parameters that make the proposal feasible for our needs in Cat Island. We consider fuel costs to be a pass-through on the bill and not a part of the PPA pricing unless you secured guaranteed pricing through a separate agreement.

“For context, we are currently exploring PPA pricing around $0.22 per kWh for Solar, BESS (Battery Energy Storage System) and prime power generation. This disparity places your proposal outside the competitive range of PPA pricing for similar initiatives across other Family Islands.”

The 62.63 cents “all-in price” is significantly higher than BPL’s total 41 cents per kilowatt hour that was levied in summer 2023 when efforts to reclaim under-recovered fuel costs were at their peak. Ms Alston, though, suggesting ways in which Burke Energy could make its offer more compelling.

“One area that presents an opportunity for cost reduction is manpower requirements,” she wrote. “BPL currently employs eight individuals in generation at Cat Island, with one open position, at a blended cost of $0.0503 per kWh - fully loaded with benefits.

“Your proposal suggests the need for 12 personnel at a cost assumption of $0.1388 per kWh for manpower. Considering current staffing levels and costs, we believe that assigning the staff through the PPA should substantially reduce your manpower cost assumptions.”

Ms Alston continued: “Additionally, we encourage Burke to explore alternative options that may further reduce costs, such as partnering with different generation equipment original equipment manufacturers (OEMs) and reassessing the overall design of the project. These measures could provide substantial savings and enhance the feasibility of your proposal.

“Please take this opportunity to provide pricing for the generation only, not the building. It is also imperative to consider the transition towards cleaner fuel sources, including opportunities to convert to LPG, which would address cost and environmental concerns more effectively. The current trajectory towards sustainable and environmentally-friendly energy sources is our priority, and it should be reflected in the proposals we consider.

“While we understand that these suggestions may differ from your original proposal, it is crucial for us to maintain a focus on affordability and sustainability in our energy initiatives. We cannot, in good conscience, accept a proposal that significantly exceeds the cost parameters of other PPA agreements we have for the Family Islands.”

Gregory Galmin, Burke Energy’s chief operating officer and managing partner, in an April 6, 2024, reply pledged that the company had modified its proposal such that generation costs had been reduced to 24 cents per KWh with another five cents to cover BPL “on-site labour”.

“Our revised unit cost pricing is marginally above the figures mentioned in your e-mail (22 cents per kWh for Exuma and Eleuthera),” he added. “Please keep in mind, as highlighted in our previous presentation/documentation, there is no real comparison between the scope of work on Cat Island and the scope of work on the islands of Eleuthera and Exuma because of the economies of scale.

“Considering we are proposing a new building, which is logistically necessary on Cat Island, and limited available labour, thereby elevating energy unit costs per KWh. With respect to manpower requirements, we are prepared to align our costs in accordance with your cost, considering a rate of 5.03 cents per kWh (as opposed to 13.88 cents per kWh per our previous offer).”

Suggesting that “the most feasible arrangement involves workers being employed directly by BPL” at any Cat Island solar plant, Mr Galmin added that the construction of new hurricane-resistant buildings was “not optional”.

“Finally, after 19 months of time and effort spent today on Cat Island, Exuma and Eleuthera, we don’t think it is prudent to introduce a new design programme particularly with a looming deadline line established by the Government of The Bahamas to meet the 30 percent goal of solar with the Family Islands by 2030, which is basically tomorrow,” he said.

Ms Alston, in an April 29, 2024, reply said the Government’s energy committee had approved Burke Energy’s redesign. “The Energy Committee approved this past week to proceed with your proposed solutions for Cat Island,” she said. “Permanent secretary, Creswell Sturrup, will be contacting you on behalf of the Energy Committee. I will be reaching out to you under separate cover to discuss technical requirements.”

However, no deal was sealed, triggering Burke Energy’s legal action which was settled by the Government meeting its demand. “The Bahamas seemingly doubled down on its approval at an in-person meeting on July 24, 2024, where it agreed to provide Burke with an executed term sheet for a Solar PPA by Friday, July 26, 2024,” Burke Energy added it its claim.

“The Bahamas did not provide Burke with an executed term sheet by Friday, July 26, 2024. Instead, on July 31, 2024, The Bahamas delivered a letter to Burke in which it stated that the ‘parties have been unable to reach agreement on the way forward. The [Bahamas] continues to have serious concerns about the technical proposal and the price proposed by Burke for an energy solution’..

“The correspondence further noted that The Bahamas would be opening a Request for Proposals (RFP) for the project, which Burke could participate in.”