End-January Target For Five Surviving BEC Bids
The five remaining Bahamas Electricity Corporation (BEC) bidders have until end-January to provide “final submissions” and answer all remaining questions the Government’s advisers have.
Simon Townend, the KPMG (Bahamas) partner and head of its corporate finance arm in the Caribbean, told Tribune Business that the remaining bidders had all been advised pre-Christmas of the next steps in the BEC process.
“Five bidders were invited shortly before Christmas to clarify and expand upon certain key elements of their bids, and to prepare final submissions by the end of January. Discussions were held with all the bidders to inform them of next steps before Christmas,” Mr Townend told Tribune Business via e-mail.
“Once the final submissions are received and evaluated, final recommendations will be made to Government, and it is expected negotiations will commence.”
He described the pricing proposals received by KPMG, plus technical advisers DNV Kema and Hogan Lovells, the legal adviser, as “competitive” and allowing the BEC process to move on to the next phase.
KPMG is acting as a key government adviser on the BEC restructuring/privatisation process, and Mr Townend’s statement – issued yesterday – indicates that one of the six bidders who entered the so-called ‘pricing round’ dropped out before the November 15, 2013, bid submission deadline.
That bidder is thought to be US-based Pike Electric Company and its all-Bahamian partner, the Northern Bahamas Utilities group, comprised largely of former Grand Bahama Power Company engineers.
Tribune Business sources previously suggested Pike and its Bahamian partner dropped out around the November 15, 2013, deadline for pricing bids to be submitted.
That is understood to have left Carolinas-based Power Secure as the only bidder still in the running for the contract to manage BEC’s transmission and distribution business.
Sources close to Power Secure have expressed confidence that it is “the last man standing”, but such a development is unlikely to be welcomed by the Government and its advisers.
While there appear to be no such problems on the generation side, given that the four bidders who entered the pricing round are still surviving, the Government will have also desired competition for the transmission/distribution contract.
The fact just one bidder is left may rob the Government of the negotiating leverage a competitive bid situation would foster, and it also has nothing to compare Power Secure’s offer to.
And the new end-January deadline indicates that the BEC restructuring process, which could see the Corporation split into two, is now running between one to two months behind the original schedule.
The original August 13, 2013, tender document, a copy of which has been obtained by Tribune Business, says the Government was supposed to select the winning bidder(s) for the generation, and transmission and distribution, contracts by 2013 year-end.
It says January-February 2014 is when the Government, and winning generation and transmission and distribution bidders, are supposed to execute their respective contracts.
All the necessary permits and approvals from the relevant government agencies are supposed to be in hand by March 2014, with legislative and regulatory reform of the Bahamian energy sector accomplished the same month.
The ‘front end’ transition to the new bidders will start in April 2014, with the winning bidder(s) agreeing to be “bound by the terms of their proposals”.
The full take over of BEC’s ‘split’ operations, as per the original timetable, is supposed to happen in May.
But, given the new end-January deadline the bidders have to meet, it appears unlikely that the winner(s) will not be selected until February at the earliest.
With contract negotiations then to follow, it appears the May ‘hand over’ date is now too optimistic, with any transition likely to now take place in summer 2014.
On the generation side, one bidder is the Caribbean Power Partners consortium, headed by Texas-based Taylor Cheek and featuring Fluor Corporation and ProEnergy Services. Other bidders are thought to have originated from the Caribbean, plus China and Asia.
As revealed previously by Tribune Business, the tender documents show JVCo, or the part-privatised generation business, will be required to enter into a 20-25 year Power Purchase Agreement to sell electricity to the transmission and distribution (NewCo) entity it has just split from.
Yet the winning bidder for NewCo will, according to the tender, be given a much shorter management contract of 10 years. And, while it will have seats on NewCo’s Board, the Government is “retaining a majority of seats”.
This is despite the winning bidder having to “provide the financing/capital for performance improvement (both infrastructure and operational in nature”, and cover any costs associated with reorganising NewCo.
The transmission and distribution partner will also have to refinance the legacy BEC debt attached to NewCo without the support of any government guarantee.
When it came to the winning NewCo bidder’s management contract compensation, the tender document said “incentive payments and the sharing of cost savings” are among the options.
By NEIL HARTNELL
Tribune Business Editor
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