In this August 2016 photo, New Fortress Energy (NFE) hosts a tour of its Montego Bay terminal. Walking the port are (from left) Brendan McElmurray of NFE, Minister without Portfolio in the Ministry of Economic Growth and Job Creation Dr Horace Chang, Attorney General and Member of Parliament for West Central St James, Marlene Malahoo Forte, Ed Marsh of the Port Authority of Jamaica, Johnathan Klion of NFE, and chairman of the Montego Bay Free Zone, Mark Hart.
The plan to build and operate a liquefied natural gas marine terminal and pipeline by American company New Fortress Energy (NFE) will place the facility five kilometres offshore within the Portland Bight area or close to the Goat Islands, according to the environmental impact assessment (EIA) released this month.
New Fortress will execute the marine terminal and pipeline project through affiliate NFE South Holdings Limited. A public consultation on the project is set for September 28 in Old Harbour.
The environmental report done by CL Environmental Consultants Limited on behalf of New Fortress also estimates that the project will provide nearly US$1 billion worth of value over its lifetime and create about 300 direct jobs in the process. Indirect jobs are estimated at 200 to 600.
“Based on this analysis, the final net present value of the project, after application of social cost benefit analysis, turns out to be US$953.4 million. Hence, the project should be undertaken as it has multiple social benefits which are reflected in the final positive NPV of the project,” the report stated.
In arriving at that final figure, the EIA considered the financial profitability measured at market prices; the net benefit of the project measured in terms of economic prices; then adjusted for the impact of the project on savings and investment, income distribution, the impact of the project on merit goods and demerit goods, and the environmental impact.
LNG plan
The project forms part of the wider plan to bring LNG to the national grid. The marine terminal will feed gas to the new 190MW plant that Jamaica Public Service Company is developing at Old Harbour. New Fortress is also supplying gas to JPS’ Bogue plant from a terminal developed in Montego Bay.
The marine terminal EIA report reasoned that consumers, but in particular the manufacturing sector, would benefit from the lower cost of electricity and the establishment of a more reliable power supply.
“This will lead to more possibility of manufacturing that will lead to creation of employment opportunities for unskilled and skilled workers. This is hard to quantify and hence the number are not adjusted for it. Which means that the social benefit stayed below is a lower bound,” the report stated.
The NFE project involves constructing a marine terminal comprising of a vessel berth and offshore offloading and regasification platform.
“The location will be up for approval by the Port Authority of Jamaica in the Portland Bight area of Jamaica,” said the environmental report.
It adds that the facility will accommodate a floating storage unit or FSU vessel for LNG storage and a LNG carrier delivering gas to the FSU. The platform would contain equipment to regasify LNG as well as related process and safety equipment.
“The liquid gas from the FSU would be carefully regasified and the gas would then be released into an undersea pipeline which will be mostly directionally drilled in basically a straight line from the platform to the vicinity of the JPS plant,” stated the EIA, which adds that the pipeline, at some five kilometres in length, would connect to the JPS gas power plant on shore.
“In addition, the project will construct a new, or refurbish an existing, automotive diesel oil line from storage tanks to the renovated power plant in order to enhance the reliability of the facility in case of LNG delivery interruptions.”
The marine terminal will be constructed offshore in the western side of Portland Bight, at a distance about 200 metres from the shipping channel to Port Esquivel in approximately 14 metre of water depth. “This location offers sufficient depth to berth the FSU and the LNG carrier vessels without the need for dredging, yet has sufficient protection from storm wave impacts as a result of the shape of the Bight,” stated the report.
Energy Policy
NFE is expected to supply JPS as well as potential future industrial users with natural gas. The main objective is to provide the Jamaica Public Service Company’s Old Harbour Plant with a cleaner and more cost-effective fuel in furtherance of the goals of the National Energy Policy.
NFE will conduct the project through its NFE South Holding and with the sponsorship of Fortress Investment Group, a global asset management firm with approximately US$70.64 billion of assets under management and an experienced investor in transportation, infrastructure and energy assets around the world, the environmental report said.
The annual fuel savings from the project is projected at US$74.2 million which represents a 38 per cent reduction in cost. The report adds that, assuming a 75 per cent pass-through to the consumer and a 25 per cent mixed of the generating capacity of the JPS, it will result in a seven per cent reduction is consumer prices. This figure matches the fuel savings published in a separate EIA report on the JPS Old Harbour plant upgrade released in April, as the projects are complementary.
JPS, which has a licence from the Jamaican Government to operate the national electricity grid, is constructing the 190MW plant adjacent to its existing Old Harbour facility in St Catherine, which has the capacity to generate 220MW of power. The current plant will be dismantled once the new one is commissioned.
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.
The Jamaica Public Service Company (JPS) says it is unable to definitively state how the use of both automotive diesel oil and liquefied natural gas (LNG) at the Bogue power plant in St James will impact the price of electricity to consumers.
It said the power plant currently burns on automotive diesel oil “and we are doing a conversion that adds the capability to also burn natural gas. So we will end up with the ability to burn both fuels at no extra cost”.
Responding to Wednesday Business queries about the rationale for the dual-fuel facility, the JPS said natural gas will be the primary fuel on which the plant operates and automotive diesel oil will be a back-up fuel “in case we have any problems with receiving natural gas”.
It added that under normal conditions, the plant will effectively be a gas-fired power plant.
IMPACTON ELECTRICITY PRICES
As to how it will impact the price of electricity the JPS said in emailed responses that “we cannot speak to the likely impact on electricity prices given the uncertainty of prices in the future (for oil vs LNG)”.
However, it said that the impact is expected to be negligible given that Bogue only represents approximately 10 per cent of the company’s total costs.
“What we can say with fairly good certainty is that the cost of electricity today is 30 per cent lower than it was one year ago, and we expect that trend to continue throughout 2016, given that 80 per cent of our net generation (production) will still be based on oil, 10 per cent will be from natural gas, and we expect renewables to make up 10 per cent of our net generation once the three renewable energy projects currently under construction (for circa 80 megwatts) are completed before the end of 2016.”
The JPS, an integrated electric utility company and the sole distributor of electricity in Jamaica, added that “that means we continue doing a good job as a country of increasing the penetration of renewable, while also diversifying our fuel mix and reducing our overexposure to oil”.
It said that it is hoping to continue doing more of that through the 37 megawatts of renewables currently being pursued by the Office of Utilities Regulation through a request for proposal, as well as its 190 megawatt gas-fired power plant that will be commissioned in mid-2018.
IMPROVING COMPETITIVENESS
Reducing the cost of electricity is critical to improve competitiveness, according to the International Monetary Fund’s latest updated memorandum of economic and financial policies.
It said that the action plan prepared by the Electricity Sector Enterprise Team foresees replacing current oil-fired generation capacity with gas, coal and ethane-fired plants to achieve significant cost savings.
Next steps will include the conversion of the Bogue power station from oil to gas, a process which the JPS is currently undertaking.
In addition, said the memorandum, the Government has approved the construction of Jamaica’s first natural gas-fired power plant, a 190-megawatt facility to be built and operated by JPS, and to be completed by 2018. Several renewable energy projects are also under way.
The Government said it will prepare a plan to ensure that all public entities – central government, local government and public bodies – meet their financial obligations in a timely manner.
In the memorandum, the Government also pointed out that urgent actions will be taken to reduce the time needed for entrepreneurs to get an electricity connection. Plans foresee the automation of the work processes within the government electrical regulator and the acquisition of an Application Management and Data Automation (AMANDA) software to streamline procedures for scheduling, inspecting, approving and certifying electrical installations.
An action plan for implementation of the reforms and adoption of the AMANDA system are expected to be completed in fiscal year 2016/17, with support from the Inter-American Development Bank.
Light company at ease with increase in customer satisfaction
Light distributor Jamaica Public Service (JPS) has reported a 24 per cent jump in annual profits, increasing from US$23 million in financial year 2014 to US$28.6 million for 2015.
The increase in profits came despite a 54 per cent decline on year-on-year net profits for the December period, with the quarter closing at US$4.87 million ($589 million), compared to almost US$10.5 million for the same quarter in 2014.
The decline in net profit was led by a US$47.6 million dip in revenues as oil which fuels most of JPS power stations continues to trend downward and the consistent passing of the reduced rates on customer’s electricity bills, according to just released data.
Revenue for the three-month period ending December 2015 was US$176.7 million, compared with US$224.3 million a year earlier.
“It’s really great to have lower prices, yes, but what’s not great is for them to go up and down. So we’ve worked on how we do create a more sustainable environment that doesn’t have that volatility. I have to say that the one that’s right here, right now is the Bogue project,” JPS CEO Kelly Tomblin stated at a press conference earlier this month.
“The other thing that will help with this problem is an integrated resource plan (IRP), which will help us in determining what resource and where will best support sustainability and most of all affordability,” she added.
Consumer electricity rates are currently at a five-year low.
Despite seeing significant declines in net profit, JPS expressed some satisfaction with the quality of service being provided to consumers which trended upwards at 70 per cent in 2015.
JPS saw one of its lowest satisfaction rates back in 2012 at 22 per cent; however, Tomblin is encouraged by the growth in customer satisfaction and plans on implementing 10 initiatives geared towards continued growth in customer service.
“You can see how customer satisfaction has grown; it’s almost at 70 per cent. We are not happy with that but we have worked very hard to say to our customers we appreciate you and we want to be in a different conversation,” she said.
Senior vice-president for energy delivery and technology, Gary Barrow, noted that the company has already seen a 30.3 per cent decrease in the frequency of outages when compared with the previous year. The company also noted that it is working on the Government of Jamaica to improve payment for street lights, as it moves to implement LED lighting over the next five years.
Throughout 2016, JPS plans on completing the conversion of the Bogue power plant, while partaking in initiatives to lead in a ‘clean and green’ Jamaica. Additionally, the company has started the process of implementing advance smart grid, proliferate prepaid meters, improving customer engagement, and the implementation of the JPS mobile application.
JPS also plans on connecting 10 new communities during the year.
Kelly Tomblin, president and CEO of JPS.
Jamaica Public Service Company (JPS) said it wrote off $100 million in debt owed by residential and commercial customers for electricity under its year-end amnesty programme.
It offered customers the opportunity to start the new year at least partially debt free.
The power utility also said it continues to work with the Government, through the Ministry of Finance, to ensure payment for street lights on a timely basis.
In introducing the amnesty, which ran from November to December 2015, JPS said it had identified critical cases where some of its customers’ debts to the light and power provider had accumulated so significantly over time that they had been classified as bad debt.
However, for customers who wanted to regularise their accounts and in some cases restore their electricity, JPS gave residential rate 10 and commercial rate 20 customers an opportunity to negotiate up to 70 per cent debt forgiveness.
Persons qualified to apply were those owing in excess of $50,000 at August 2015 and had their service disconnected; as well as residential and small commercial customers who owed more than $100,000 up to August, but whose accounts were still active.
Last Friday, JPS President and Chief Executive Officer Kelly Tomblin, addressing a media briefing at the company’s offices in New Kingston, said more than 1,000 account holders benefited from the amnesty.
STREET LIGHT REPAIRS ONGOING
As for the issue of defective street lights, Tomblin said repairs were ongoing, while acknowledging that the utility got daily complaints.
JPS has about 100,000 street lights and last year the company replaced 27,700 of them, an average of 514 per week.
“We are replacing street lights, hundreds and hundreds every week, so it’s not that JPS isn’t aware…”, she said.
Against that background, Tomblin said: “There are two things that are going on that we have to fix.
“We are working with the Government right now to find a way for us to get paid more promptly,” she said. “I have a commitment by the minister of finance. We work with him all the time. We all know that we have a lot of different obligations and a lot of different challenges to meet and we do know today that we are working on solutions to run our street lights on, for instance, LED.”
At the same time, she said the company has to be careful how much it invests in the current solution “if we are going to have this three to four year plan to replace them.”
She acknowledged the issue is, for some, one of security, but said the street light problem is compounded by theft.
“With the level of electricity theft, we will never have first-class street lights … we cannot have street lights operating if we have a couple of hundred people stealing,” the utility boss said.
JPS is manager of the national grid and monopoly distributor of electricity supplies. The utility collects around $100 billion per year in billings.
Ten companies submitted bids to build and operate renewable energy plants that run on solar, wind, water or waste, but two are in danger of being disqualified for non-payment of the bid security.
The Office of Utilities Regulation (OUR) received the bids for supply of up to 37 megawatt of renewable power to the grid on Wednesday and will determine the preferred bidders by April.
The bids included a 24.7MW waste-to-energy plant at US$110 million, by Green Waste Energy Inc; a 37MW wind plant at US$61 million by Wigton WindFarm Limited; a 20MW solar plant, at US$33.15 million, by WRB Enterprise Inc and a separate bid to build a 37MW solar plant at US$72.15 million, which contains three options.
Great Valley bid US$50 million to develop a 26.4MW wind farm; Tamarind Energy proposed a 36.3MW at US$76.96 million; and BMR Jamaica bid US$18.27 million for a 9.9MW wind farm to expand the existing wind farm that it is developing in central Jamaica.
The other four bids were a 37MW solar project at US$48.7 million with an alternative option by Eight Rivers Energy Company Limited; a 2MW hydropower project, at US$8.9 million, by Petroleum Corporation of Jamaica; a 37MW solar plant at US$77.14 million by Jamaica Energy Partners; and a 30MW biothermal energy plant, at US$93.8 million by Bio Energy Resources Limited.
“We are happy with the process. It was done in an orderly and professional manner,” said Angella Rainford of Eight Rivers Energy Company following the bid openings held at the OUR.
“The returns are attractive, but it’s also the right fit for the country as it mitigates against the reliance on oil,” said Rainford.
Eight Rivers took no chances and submitted a US$700,000 bid security.
Two of the 10 bidders – Green Waste Energy and Bio Energy Resources – did not put up the required security, OUR legal Chenee Rily disclosed at the bid opening.
The OUR required each bidder to submit security equivalent to one per cent of the project cost.
“The only two bids with firm capacity failed to offer a bid security it’s unfortunate,” said Cecil Gordon, the director of generation at Jamaica Energy Partners, in discussion with the Financial Gleaner at the OUR event. “Waste-to-energy gives a constant output so it’s firm capacity.”
Gordon explained that wind solar and hydro can fluctuate depending on external factors, including weather. He also indicated that waste-to-energy projects are more expensive to operate – “which means a lower return,” he added.
OUR said on Thursday that the decision on whether to disqualify the two waste-to-energy bids would be considered by the bid review committee when it convenes.
Last July, the OUR issued a Request for Proposals (RFP) from local and international interests to supply up to 37MW of electricity generation from renewable energy resources on a build, own and operate basis. Wednesday was the deadline for the receipt of bid documents.
This latest project is to complete an RFP process started in 2012 to identify interested entities to submit proposals for the supply of one or more plants of varying configurations greater than 100kW and up to 115MW of renewable energy. At that time, 78MW was identified from three successful bidders.
LIGHT AND power providers, the Jamaica Public Service Company (JPS) said yesterday that it is getting independent advice from its lawyers on whether to proceed with a contract with Spanish firm Abengoa to construct its power plant at Old Harbour, St Catherine.
Kelly Tomblin, the chief executive officer of JPS said yesterday that its shareholders held a conference call with Abengoa to discuss the way forward.
Abengoa’s chief executive Santiago Seage resigned yesterday after it emerged the Spanish renewable energy giant was close to bankruptcy.
The JPS, with the assistance of AMEC Foster Wheeler, a consultancy firm, selected Abengoa whose package consists of general electric combined cycle frame 6B gas turbine. The light and power company was in the process of negotiating a performance contract when the matter of the bankruptcy came to light.
“We were never going to enter into a performance contract until we had some assurance about their financial abilities,” Tomblin said.
She said that December 9 was the deadline for Abengoa to satisfy JPS of its ability to undertake the project and hinted that the light and power company is getting ready to move beyond Abengoa.
“Their problem is that they have some debt coming due but they don’t have the cash to pay. They are going to try to utilise their assets and do other things but that takes too long so we won’t be able to wait out that,” Tomblin said.
The Electricity Sector Enterprise Committee, ESET, said that while it is watching the developments, it is not totally concerned at this point.
Profesor Alvin Wint, a member of the ESET, said that in addition to Abengoa, other entities had submitted detailed bids to construct the power plant and they would be in line to be considered to take on the project.
“We will be requiring that they move quickly and if they need to go to a plan B they go quickly,” Wint said.
Both major shareholders of JPS, Marubeni and Korea East West Power Company Limited have committed to each inject up to 50 per cent of the approximately US$990 million equity that is required to develop the 190 megawatt power plant by year end.
The JPS intends to raise approximately US$210 million in debt funding to help finance the project.
JPS to open discussions with other renewable vendors
The Jamaica Public Service (JPS) yesterday announced that it will be engaging in discussions with other renewable vendors to ensure execution of the planned energy 190 MW Power Plant in Old Harbour, St. Catherine.
Chief Executive Officer, Kelly Tomblin in a press release advised the public that Spanish renewable energy and engineering firm Abengoa has filed for protection from creditors – an initial step towards filing for bankruptcy. The company was recently announced as the preferred bidder to construct the combined-cycle plant in Old Harbour.
“While JPS notes the development with regret, it is fully prepared to activate its alternative plans to ensure the execution of the project, which will replace the present Old Harbour Bay Power Station, while adding more Liquefied Natural Gas to the country’s energy mix,” Tomblin stated.
“We will be having dialogue with Abengoa — but JPS remains undaunted by the news. As a responsible corporate entity, our company has been in full preparation mode for any type of challenge regarding the completion of this project. We will not be derailed from our mission to bring real change to the energy sector and by extension, to Jamaica,” she continued.
The CEO reportedly stated that JPS has been eyeing other vendors since the announcement of the Abengoa’s financial situation.
Abengoa, which reported debt of ¤8.9-billion in its third quarter financials, began bankruptcy protection proceedings to avoid what could be one of Spain’s largest insolvencies.
The figure could be doubled when including ¤2.1 billion in funds it owed to suppliers and ¤5.9 billion of debt the company has in subsidiaries it said could potentially be sold. According to reports, the company has filed for protection from creditors with hopes of reaching a deal on its debts by March.
According to Tomblin, Abengoa was selected based on its wide ranging and impressive technical expertise. The company has been touted as one of the world’s top builders of power lines transporting energy across Latin America and a top engineering and construction business, making massive renewable-energy power plant.
The light and power company also had the understanding that Abengoa’s financiers were committed to the company for the long term.
“JPS wishes to assure its customers and all stakeholders that the 190 MW project remains on track for the plant’s commissioning in 2018.The Company will keep stakeholders informed as events unfold,” she said.