EWI licence provides for forced sale of assets
Daraine Luton, Senior Staff Reporter
ENERGY WORLD International (EWI), the favoured company to undertake the baseload project to supply power to the national grid, could see its power plants and other related assets sold for 75 per cent of value in the event of non-performance.
The embattled Hong Kong-based company has agreed to the stipulation in the April 14 licence issued by Energy Minister Phillip Paulwell for it to generate 381 megawatts of natural gas-fired energy for sale to the Jamaica Publice Service (JPS).
The forced-sale clause, however, is milder than terms which were proposed by the regulators, the Office of Utilities Regulation (OUR), in the draft licence prepared for Paulwell.
The OUR had proposed that "where the licensee is unable to demonstrate its ability to resume normal operation of the facility to the reasonable satisfaction of the minister within 90 days after the commercial operation date set out in the power purchase agreement, the minister shall have the right to acquire, and/or to have his designee acquire all of the rights, title and interest of EWI in the business for an amount equal to 50 per cent of the purchase price.
The trigger for the intervention of the minister, as outlined in both the draft and actual licence, is the failure of EWI to operate at all, or any substantial part of the system or equipment necessary for the performance of functions under the licence for a period of 48 consecutive hours without consent from the minister.
The clause allows the minister or his designee to enter any site at which the licensee operates and may assume operational control of that system or equipment.
But in a departure from what was proposed by the OUR, Paulwell has issued EWI a licence that states that if EWI is unable to demonstrate its ability to resume normal operation of the system or equipment to the reasonable satisfaction of the minister within 180 days or a longer period, as may be agreed, the minister will have the right to acquire all of the rights, title and interests of the company, paying 75 per cent of its value.
The purchase price is calculated at the present value of the business, which is to be determined on a cash-flow methodology.
The minister is also given the power to purchase the business and its facilities for 75 per cent of its value, if a default under the power purchase agreement between EWI and the JPS occurs and continues.
If the minister elects to exercise his right to acquire such rights, title and interest, the payment should be made within one year after notice to such exercise has been issued.
The payment clause has been shortened by one year when compared to the OUR's draft licence, which proposed that payment, including interest, shall be made to the licensee not later than two years after notice of election to exercise such right.
The licence granted to EWI is for a period of 20 years, which is renewable, providing that the company applies, in writing, to the minister five years prior to its expiration date.
EWI is at the moment seeking to get the Inter-American Development Bank (IDB) to reverse its decision not to provide non-equity funding and its imprimatur for it to secure other capital for the construction of the power plant.
The company says it will cost US$737 million to execute the project but, up to press time, had not posted the US$36.85-million performance bond, as mandated under the agreement with the Government.
The money was due last Thursday night, but Paulwell said the "extenuating" circumstances which have arisen due to the IDB's stance led him to relax the rules.
EWI on Tuesday said it lodged the necessary amounts with its Hong Kong bankers to allow for the payment of the bond. The company said the bank was doing its due diligence before releasing the funds for the payment of the performance bond.
EWI is required to commission the facilities that are critical to the reduction of the country's energy costs by 2016.