Wed | Jun 20, 2018

OUR bows out, but JPS not giving up on new plant

Published:Wednesday | February 6, 2013 | 12:00 AM
Jamaica Public Service Company headquarters on Knutsford Boulevard in New Kingston. - File

The Office of Utilities Regulation has formally cancelled its agreement with JPS for development the 360 MW liquid natural gas plant, but the power company said Tuesday that the decision does not mean an end to the energy project.

Jamaica Public Service Company presented a modified version of the development to the OUR last Thursday, but would not say whether that plan still banks primarily on LNG for the plant ahead of feedback from the regulator on its proposal.

Company spokeswoman Winsome Callum told Wednesday Business that the feasibility of utilising LNG to power the plant was included in the current proposal.

She declined comment on the scope of the new plan.

"Last week, what we presented was a modified version of the original plant project," said Callum, the head of corporate communications.

"We expect feedback by Friday," she said.

The power company was selected by the OUR over a year ago as preferred bidder for the 360 MW plant and commenced negotiations on the execution of the project, including the feasibility of getting LNG done.

JPS was also the only bidder for a project that would be reliant on non-existent LNG infrastructure and supplies to be successfully executed.

The talks had not reached the stage for a contract to be issued. Callum said that while it was agreed that JPS would develop the plant, the negotiations would have finalised the terms of the contract to be awarded.

JPS and its majority owners, Marubeni and Korea East West Power, created a vehicle called South Jamaica Power Company Limited (SJPC), to execute the project and operate the plant that it estimated would cost US$614 million to develop.

Jamaica finally gave up late last year on developing LNG, but JPS opted to press ahead on the plant project, saying it would explore the possibility of sourcing its own gas.

The OUR's decision to cancel talks suggests the utility has made little progress.

The regulator said JPS had failed to hold to deadlines to identify the supplier of natural gas (LNG) for the project and provide a renewed bid security.

"This was the third extension granted by the OUR to JPS and SJPC. They were given until January 30, 2013 to complete the outstanding matters relating to the bid. The OUR's decision comes bearing in mind its mandate and its overarching duty to the public and the national interest," said the regulator.

Callum said JPS spent US$2 million on project preparations for the 360 MW plant.

Onerous terms

Last night, JPS issued a press release in which president and CEO Kelly Tomblin said the company could not afford the requested bid security of US$6 million.

On the issue of the LNG fuel pricing, Tomlin said the market could not support JPS's earlier estimates of LNG prices as low as $8.50 mmbtu, and that supply terms were too onerous.

"We have received indicative prices of upwards of $12.50 mmbtu for LNG and the related infrastructure, which we estimate would result in a reduction of approximately 20 per cent in electricity costs," she explained.

"Given the uncertainty of the gas supply, and the project in general, JPS was not in a position to get further credit support to allow us to provide the required bid bond of US$6 million," she said. "Also, the gas suppliers were requesting credit support of more than US$100 million to supply the gas."

The power utility was awarded "the right" to construct a combined cycle plant powered by LNG with back up diesel fuel.

The project was meant to be the first tranche of a 480 MW programme that would have replaced 292 MW of capacity at aged plants while adding a net 188 MW to the national grid, but stumbled because the Jamaican government has failed after several trials to develop LNG infrastructure and secure supplies.