Will Promigas remain in LNG project?

Parent company sells its 52% stake in gas pipeline firm

Houston-based AEI, the parent firm of the electricity company, Jamaica Private Power (JPP), says it is selling $4.8 billion worth of assets in South America, including a 52.13 per cent stake in Promigas, the Colombian pipeline company that is part of a consortium that the Jamaican Government controversially named as its preferred bidder for an LNG project here.

It was not immediately clear how this development will impact Promigas' participation in the LNG consortium at a time when the Government is promoting LNG as its major fuel source for the future and has invited tenders for 480 megawatts of generating power to be fired by gas.

Chris Zacca, who heads a government task force overseeing the LNG project, could not be immediately reached for comment and several calls to JPP's CEO, Jose Arenivar, over the past week were not returned.

However, officials of the Jamaica Public Service Company (JPS), the monopoly transmitter and distributor of electricity, to which JPP sells the output from its 60-megawatt, diesel-fired power plant, said that arrangement was unlikely to be disturbed.

That deal runs until 2018.

In a recent public announcement of the planned sales - which account for 80 per cent of AEI's assets - CEO Jim Hughes said the decision followed a review of the company's operation since the collapse of an IPO 15 months ago.

"We concluded that AEI should sell the vast majority of its regulated assets, return the capital to shareholders and plan to reorganise the company around a smaller business focused on power generation."

With regard to Promigas, a Colombian gas pipeline operation, AEI says it is selling its stakes to five outfits, some of which are private equity firms. The structure of that deal is unclear.

However, AEI's pull-out of Promigas is likely to occupy the minds of senior Jamaican government officials, including that of Prime Minister Bruce Golding.

Most financially healthy

Promigas was perhaps the most financially healthy of the participants in the consortium, led by Exmar Corporation of Belgium, with which the Government started negotiations for LNG storage, regasification and gas distribution facility.

Promigas is/was to oversee the pipeline segment of the venture that has been plagued with controversy.

First, the Office of the Contractor General opened an investigation into the award of the Exmar consortium's preferred bidder status after complaints that one of its members, Ian Moore, the CLNG boss and a former chairman of the Government's Petroleum Corporation of Jamaica, may have benefited from privileged information.

More recently, a consultant's review of the project raised several questions about the assumptions on which it was predicated.

The findings are believed to have contributed to Golding's decision to remove the LNG project from the control of his energy minister, James Robertson, transferring it to his own office under Zacca's guidance.

Just last week, at a public briefing held by Zacca, potential bidders for the generating capacity complained about their inability to develop proper tenders in the absence of information about the potential source and price of LNG.

Moreover, the Government is yet to receive commitments from potential off-takers of LNG, including JPS and the island's alumina refineries that they will use the fuel. This makes it difficult for the Exmar consortium to develop contracts, which are necessary to proceed with serious financing negotiations with bankers.

business@gleanerjm.com