April 2016

Jamaica Private Power Company (JPPC) saw its loss position double in 2015.

Its parent, Kenon Holdings, reported US$2 million ($234 million) net loss for last year compared with US$1 million the year before.

The private power producer, which sells electricity to all-island distributor, Jamaica Public Service Company (JPS), managed to increase its revenue by four per cent from year-earlier levels to US$45 million in 2015.

This was mainly due to the company increasing its electricity generation from 425 gigawatt hours, or 10 per cent of total national grid’s needs, to 445 GWh, of which well over 90 per cent was sold, likely because it has one of the most efficient fossil fuel, or thermal plants in Jamaica.

JPS’ system uses a dispatch application that determines the best combination of operating levels for each plant supplying the grid to ensure that energy is provided at the lowest total cost to the consumer.

Last year, JPPC improved the efficiency at its 60 megawatt plant, lowering the heat rate from 8,306 Btu/kWh in 2014 to 7,989 Btu/kWh in 2015.

In other words, it increased the amount of the energy stored in the heavy fuel oil (HFO) that was converted into electricity from 41 per cent to 43 per cent. That is, it used two percentage points more of the HFO’s energy to make electricity.

This helped the Rockfort, Kingston-based power producer lower its average fuel cost from US$137 per MWh to US$69 per MWh, albeit a dramatic fall in oil prices contributed more to this improvement. Average sales price, therefore, fell from US$182 per MWh (or J$20 a kWh) in 2014 to US$101 per MWh (or J$12 a kWh).

Indeed, the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) improved from US$1 million to US$2 million, but this would not have been enough to cover staff cost, debt servicing and depreciation.

JPPC is the smallest of the power producers that use fossil fuel-based plants. Jamaica Energy Partners and its sister company West Kingston Power Plant, combined, generates about 30 per cent of Jamaica’s electricity requirements. JPS produces over 50 per cent.

Some six per cent of the country’s electrical energy is derived from hydro and wind, with another three to four percentage points expected to come from 78MW of wind and solar scheduled for commissioning by next year.

Amid improving market sentiment and a weakening dollar, the World Bank is raising its 2016 forecast for crude oil prices to $41 per barrel from $37 per barrel in its latest April 2016 Commodity Markets Outlook, as an oversupply in markets is expected to recede.

The crude oil market rebounded from a low of $25 per barrel in mid-January to $40 per barrel in April following production disruptions in Iraq and Nigeria and a decline in non-Organization of the Petroleum Exporting Countries (OPEC) production, mainly US shale.

A proposed production freeze by major producers failed to materialise at a meeting in mid-April, the World Bank said in a release.

“We expect slightly higher prices for energy commodities over the course of the year as markets rebalance after a period of oversupply,” said John Baffes, senior economist and lead author of the April 2016 Commodity Markets Outlook.

“Still, energy prices could fall further if OPEC increases production significantly and non-OPEC production does not fall as fast as expected,” he added.

All main commodity indices tracked by the World Bank are expected to decline in 2016 from the year before due to persistently elevated supplies, and in the case of industrial commodities – which include energy, metals, and agricultural raw materials – weak growth prospects in emerging market and developing economies.

Energy prices, including oil, natural gas and coal, are due to fall 19.3 per cent in 2016 from the previous year, a more gradual drop than the 24.7 per cent slide forecast in January. Non-energy commodities, such as metals and minerals, agriculture and fertilisers, are due to decline 5.1 per cent this year, a downward revision from the 3.7 per cent drop forecast in January, the World Bank said.

COST PROBLEM

According to a March 2016 International Monetary Fund (IMF) working paper titledCaribbean Energy: Macro-related Challenges, the single most important cost problem is the region’s heavy dependence on expensive, imported fossil fuels.

As in the United States, the cost of using petroleum to produce electricity is several times higher than alternative fuels, it said.

Excluding Haiti, biomass represents around 11 per cent of Caribbean energy supply, mostly concentrated in Jamaica, the paper said.

It noted that Jamaica is the second-largest electricity consumer, after Trinidad and Tobago, with aggregate consumption of three billion kilowatt hours in 2012. That represents 32 per cent of total regional electricity consumption, excluding Trinidad and Tobago.

The IMF estimated that the net benefit to Jamaica from a decline in oil prices as a per cent of gross domestic product was four per cent.

 

Gleaner

If the Peru and Mexico auctions are any indication, Latin American markets are establishing a new, and very low, normal for solar prices. Peru recently awarded a solar power purchase agreement (PPA) at $47.98/MWh to Enel Green Power (EGP), making headlines as the lowest PPA on record. But just weeks later, EGP beat its own a record in Mexico’s auction with a PPA price of $35.44/MWh for solar PV, and an average price for all awardees of $50.77/MWh for wind and solar.

What’s pushing these prices down, and how long will it last? Developers are likely making a few key assumptions:

1) Commodity prices are falling — 80 per cent since 2008, according to data from IRENA — and are expected to continue dropping, so modules will be cheaper;

2) Energy Performance Certificate costs are likely to fall as renewable energy penetration increases throughout the region; and

3) The quality of resources is very good in these markets, increasing the effectiveness of solar technologies so developers can get more bang for their buck.

While solar costs are indeed falling, it’s the jaw-droppingly low price bids by EGP that are making headlines. They are building massive installations, much larger than in the past, and economies of scale are helping to push down the prices. Access to funds at highly competitive rates from organisations such as the European Investment Bank has also enabled EGP to bid aggressively.

“Our prices were the most competitive but in line with those submitted by other international operators taking part in the auction,” said Carlo Zorzoli, EGP’s head of Latin America.

EGP has won 1,172 megawatts of solar PV in Latin America in 2016 alone. That, in itself, is noteworthy; perhaps more noteworthy is that they believe they can build profitable projects across a portfolio of tightly priced PPAs.

It’s hard, and perhaps not even desirable, for other developers to compete with EGP’s low bids, but there are other players in these markets bidding at or very near to Enel’s winning prices. Companies eager to make a footprint in the market are coming in at or below cost, according to industry analysts, potentially with internal rates of return in the single digits – a reality they are willing to face to gain a strong foothold in these young markets with enormous potential.

A favourable regulatory environment will continue to be vital in attracting serious developers and maintaining low prices. Peru’s regulator, Osinergmin, required very high bid bonds for their RFP — $50,000/MW — and tied the PPA price to the US dollar, which could prevent results similar to the frenzied bids and current situation in Brazil.

Mexico also allowed developers to bid in pesos indexed to the US dollar, which offered more economic certainty.

Peru’s next request for proposal is couple of years off, but Mexico has one coming up in August, and many expect to see even lower prices.

However, when it comes to other Latin American markets, while prices may be relatively low, they aren’t expected to break records, particularly in Argentina where many unknown factors loom. Broadly, however, the theme is clear: Latin America is opening up, competition is fierce and — at least as far as pricing is concerned — it’s a race to the bottom.

Jamaica Observer 

Albert Daley: We have developed a proposal and they are favourably disposed to making the funding available to us.

With its role as National Designated Authority (NDA) with the Green Climate Fund (GCF) secure, Jamaica’s Climate Change Division is moving to ensure it successfully fulfils the functions.

To that end, the division recently applied to the GCF for financing to boost its capacity to deliver on its mandate as NDA.

“We have developed a proposal and they are favourably disposed to making the funding available to us, but there are some conditionalities that we have to meet,” the division’s principal director, Albert Daley, told The Gleaner.

It was not clear when the island would receive the official final word from the Fund.

Meanwhile, as NDA, the division serves as the GCF’s “first point of contact” for the country while also providing information to local actors on the GCF.

“An important role is not only to provide information re the GCF’s facilities, services and offerings for loans and grants; it also has the task of recommending national implementing entities (NIEs), which are institutions through which the GCF channels funds to a country or region and which is given oversight responsibility for the funds,” Daley noted.

Already, he said, the division has approached two public entities that could likely fill that role.

“Once we recommend, then the GCF will begin working with the entity we recommend to complete the process of accreditation,” he revealed.

OPPORTUNITY TO DEVELOP PROPOSALS

With an accredited NIE, the island can go all out to develop proposals for projects that it can itself administer.

“The ideal thing is not for people outside the country to submit proposals on our behalf, but for us to submit our own projects so that whatever returns from them will be in the country,” Daley noted.

As NDA, the division also has as its mandate to provide assurances to the GCF that whatever proposals are coming from Jamaica are in line with the island’s national priority areas for action, pursuant to its climate-change adaptation and mitigation efforts.

“The NDA is required to submit a no-objection letter to the GCF to say we have no objection, as the NDA, to [any proposed] project going forward because it is a national priority. We are also expected to indicate the extent to which a consultative process was followed in terms of developing the project,” Daley revealed.

According to the division boss, there is no question of the value of the step Jamaica has taken in having the CCD so designated.

“If we don’t have an NDA, we cannot initiate dialogue or advance any work with the GCF. For a country to engage with the GCF, it is a requirement that they have an NDA. They will only consider a project, for example, if it is endorsed by an NDA; it is a prerequisite for engagement with the GCF,” he explained.

Gleaner

Mahlung

Kamina Johnson Smith, minister of foreign affairs and foreign trade, will this Friday represent Jamaica during the official signing of the Paris climate-change agreement in New York, following last November’s conference in France.

Some 200 countries had gathered in Paris for the COP 21 climate conference and, in December, adopted the new agreement, which aims to limit carbon emissions.

Clifford Mahlung, project administrator at the Climate Change Division in the Ministry of Economic Growth and Job Creation, told The Gleaner that the signing is a significant step towards strengthening the work that has started to mitigate the effects of climate change.

“We will be among the other heads of state who will be there. This is the first step towards becoming a party to the Paris agreement because this has to be followed up by ratification,” he said.

“The process towards ratification will require government approval, and so that process is on the way. We should be complete before the year ends.”

Mahlung said now that the agreement is open for signature by the parties to the convention, United Nations Secretary General Ban Ki-moon has been asked to convene a crucial ceremony, which will be attended by United States President Barack Obama, among others.

 

NEED FOR SENSITISATION

 

Making reference to a post-COP 21 discussion held last week at the Four Seasons Hotel in New Kingston, Mahlung said it was important that Jamaicans are sensitised to the importance of the agreement, especially as it relates to carbon emissions.

“With the significance of COP 21, we decided to have this discussion one week before the official signing. This new climate-change agreement builds on the convention and provides the basis which will accommodate further work, with respect to the climate-change process,” Mahlung said.

The agreement itself consists of many areas, including the new long-term goal in keeping future temperatures well below 2˚C and pursuing efforts to keep those temperatures as close to 1.5˚C as possible.

“Even though we contribute less than one per cent to the global emissions, it is important that we do our part to control our energy output, which will signal to the emitters that we are serious about climate change, which will mean also that they have no excuse but to reduce their emissions as well,” he said.

jodi-ann.gilpin@gleanerjm.com

 

The Gleaner

Winsome Callum

 

Up to late last night, the Jamaica Public Service Company (JPS) was yet to determine what caused a “fairly widespread” power outage that left tens of thousands in darkness.

Reports of the outage began to emerge shortly after seven o’clock from Manchester, Hanover, St Mary, Kingston, St Andrew, Portland, St Catherine, Trelawny, St James, Clarendon, and Westmoreland.

The JPS issued a statement almost an hour later, from its Twitter account, advising that “the problem seems to be fairly widespread as customers in several parishes have been affected”.

It added: “We are not able at this point to say what caused the problem or how soon we’ll have everybody back on, but power has already been restored to some areas.”

Winsome Callum, director, corporate communications at JPS, later explained that “a number of generating units went offline simultaneously, resulting in a fairly widespread outage affecting customers in several parishes.

“We are not able at this point to say what caused the units to go offline or how soon we’ll have everyone back,” she added.

Callum explained that the restoration “could take a while because of the pretty involved process of ramping up units before energising the lines”.

Meanwhile, Energy Minister Dr Andrew Wheatley said he had been in contact with the Kelly Tomblin, president and chief executive of JPS, about the situation.

“I’m sure that I will be getting a report on the matter,” Wheatley told The Gleaner.

Last month, the light and power company advised that customers could experience outages between April and May as the company moves to convert its operations at the Bogue power station in St James to natural gas.

 

The Gleaner

The JPS power plant in Old Harbour

 

In an update last week on the US Department of Energy’s (DOE) website American LNG— associate company of New Fortress Energy – said there were likely to be delays at its planned US$250-million onshore LNG export facility at Titusville, Florida. Operations will likely begin in 2017, not in April 2016 as projected before.

American LNG is controlled by Fortress Equity Partners, which is also the parent of New Fortress Energy.

New Fortress Energy won out of a field of eight bidders to provide a long-term natural gas solution for JPS power plants, starting with Bogue in Montego Bay.

In March this year, New Fortress also secured the contract to supply gas to the planned Jamaica Public Service Company (JPSco) Ltd 190MW power plant in Old Harbour, St Catherine.

American LNG, on March 7 committed to supply New Energy with up to 2.26 Bcf/year (billion cubic feet per year).

Overall, American LNG received approval in 2015 to export up to 600,000 mt/year of LNG (approximately 30.2 Bcf/year regasified) in ISO containers to countries with which the US has free-trade agreements.

Now it said that developments at its Titusville facility indicated a likely commercial operation date in 2017 instead of April 2016.

Efforts by the Jamaica Observer to find out from New Fortress how this would affect plans for Bogue were not answered up to press time.

New Fortress last year signed the supply accord with JPSCo to provide LNG for the power company’s 120-MW Bogue power plant at Montego Bay. To this has been added Old Harbour.

The 190MW gas-fired plant is intended to replace 292 megawatts of Heavy Fuel Oil Power Plants in Old Harbour and Hunts Bay which are being phased out.

American LNG told the Department of Energy that it is now producing LNG from its Hialeah facility near Miami from which the first export of LNG occurred February 5.

Natural gas for the facility is supplied by Peninsula Energy Services Co to an affiliate of American LNG.

The project has approval to export LNG in ISO containers to non-free trade agreement nations.

In March, LNG World news online reported that American LNG made the first export from the facility on February 5, 2016.

 

The Jamaica Observer

 

Screen Shot 2016-04-11 at 00.32.57

KINGSTON, Jamaica – Customers of Jamaica Public Service (JPS) will again be able to apply for licences to sell their excess electricity generated from renewable energy sources to the grid as of April 11, 2016.

Minister of Science Energy & Technology (MSET) Dr Andrew Wheatley today announced that the Office of Utilities Regulation (OUR) will resume accepting applications on behalf of the ministry for net billing under similar terms as the previously-concluded net billing pilot project until the details of a permanent programme are finalised.

According to a release from the ministry, the decision to continue the programme came out of an agreement reached on April 7 with the OUR and JPS.

All parties agreed that it was in the best interest of all concerned that the net billing programme be resumed so as to strengthen the development of the renewable energy sector in accordance with the National Energy Policy, the release said.

The two-year pilot programme was extended to May 2015, as the system peak demand threshold for net billing was not met.  As at March 2015, 351 applications were received, 311 of which were granted licences, the ministry said.

JPS on Knutsford Boulevard in New Kingston

 

The Development Bank of Jamaica (DBJ) has advised that the Government of Jamaica (GOJ) is committed to selling its stake in the Jamaica Public Service Company Ltd (JPSCo), the island’s sole power distributor. However, timelines for the divestment project and method of sale are not yet determined.

JPSCo, which has assets of near US$1 billion and saw revenues of US $759.82 million in 2015, is owned 19.9 per cent by the GOJ.

Other shareholders are MaruEnergy JPSCO 1 SRL and EWP (Barbados) 1 SRL, each holding 40 per cent interest, and private individuals with 0.1 per cent.

The DBJ, which is home to the government’s divestment unit, said Friday that the GOJ had taken a policy decision to “divest itself of these types of commercial assets once the opportunities arise.

“The government has recognised that in order to build efficient and competitive markets, these types of privatisation initiatives should be undertaken.”

The DBJ said the divestment of the 20 per cent shareholding in the Jamaica Public Service “is intended to broaden the ownership base of assets in the country”.

It did not indicate the method of divestment to be undertaken.

The principal activities of the JPSCo are generating, transmitting, distributing and supplying electricity in accordance with the All-Island Electric Licence issued in 2011.

The Jamaica Observer asked JPSCo, via the company’s communication unit, if other shareholders had the right of first refusal, and if they were considering bidding in a future divestment.

The company declined to answer, stating, “As it happens, we cannot comment on such matters as they would be the subject of confidential discussions as well as the confidential agreements between the parties. Should the Government of Jamaica be divesting their shares, it is likely that the appropriate disclosures will be made in due course.”

JPS also declined to comment on the for sale value of the asset.

Shareholder MaruEnergy JPSCO 1 SRL is incorporated in Barbados and is ultimately owned by Marubeni Corporation, which is incorporated in Japan.

The other partner, EWP (Barbados) 1 SRL, is incorporated in Barbados and is ultimately owned by the Korea Electric Power Corporation, which is incorporated in South Korea.

The GOJ’s ownership in the JPSCo is held collectively through the Accountant General’s Department and the DBJ.

In relation to the schedule for divestment, the DBJ indicated that the Ministry of Finance and the Public Service (MOFP) “has been seeking an appropriate time for divestment of these shares in keeping with its policy. The steps to be taken will depend on the particular method chosen to dispose of the asset.”

JPSCo had total assets of US$933.74 million as at December 31, 2015.

Year-end revenues were US $ 759.82 million versus US$1.023 billion in 2014. Nevertheless, net income for the 12 months of 2015 came out 15 per cent per cent ahead of the prior year.

The company saw profit of US$26.51 million in 2015 versus US$23 million in 2014. Earnings per share were US$ 0.12 in the last year compared to US $0.11 in 2014.

 

BY AVIA COLLINDER Business reporter collindera@jamaicaobserver.com

The Jamaica Observer

Kelly Tomblin, president and chief executive officer of the Jamaica Public Service Company (JPS), is arguing that the visit of United States President Barack Obama to Jamaica last year has improved the energy prospects for the island.

Tomblin, one of the participants in a Gleaner project ahead of Friday’s one-year anniversary of Obama’s visit, said: “Obama’s visit gave Jamaica greater strength in gas negotiations with gas suppliers by signalling support for US gas to Jamaica, thus increasing competition and the number of available suppliers and supporting greater optimisation of Jamaica’s renewable resource.”

During his two-day visit to the island, Obama announced the formation of an energy fund to finance clean-energy projects in the region. He made the announcement at the Caribbean Community (CARICOM)-US Summit.

“Caribbean countries have one of the highest energy costs in the world. Today, we are announcing new partnerships and a new fund to mobilise private-sector projects in clean energy for the Caribbean and Central America,” he said at the conclusion of the summit.

OPPORTUNITIES NEEDED

The energy fund now forms part of the Caribbean Energy Security Initiative, which aims to reduce the region’s reliance on fossil fuels.

According to Tomblin: “Obama’s visit created more opportunities throughout the energy sector by voicing confidence in Jamaica’s landscape and supporting US investment in Jamaica’s energy sector.”

She called for Jamaica to act fast in capitalising on the opportunities created in the energy sector by the initiatives announced by Obama.

“The only threat exposed during Obama’s visit was the truth that if we don’t act fast, other Caribbean countries will take advantage of the new open door in the energy market and secure the hub position,” she said.

In giving further reflections on the anniversary of the visit, Tomblin highlighted the need for Jamaica to position itself as the hub for the provision of gasolene as a cheaper source of energy.

“Let’s make sure we step fully into this moment he opened up by driving this gas-procurement process through quickly and position Jamaica as an obvious hub for that product which will be key for our neighbours to meet their overall environmental commitments,” she said.

“We cannot afford bureaucracy now.”

Gleaner