Show us the money
Daraine Luton, Senior Staff Reporter
IN A bid to prove that it has the money required to undertake the 360-megawatt power plant construction project, representatives of Energy World International (EWI) and the Office of Utilities Regulation (OUR) will this week be locked in meetings to discuss the issue of project financing.
The Hong Kong-based EWI has been selected as the preferred bidder in the baseload generating capacity project, which is a central plank in the push to reduce Jamaica's energy cost.
The company says it will cost US$737 million to execute the project. It has already paid a one per cent bid bond, and will soon be required to post a five per cent performance bond, which will become due prior to construction.
Albert Gordon, the director general of the OUR, told The Sunday Gleaner that EWI's ability to finance the project will be a factor taken into account by the regulator as it considers whether to recommend to Energy Minister Phillip Paulwell that a licence should be granted to the developer.
"We know they were
looking at different options for the financing, and that is always a good thing, to look at different options so you can choose the best option in the end," Gordon said during a visit to the newspaper's Kingston offices on Friday. "We are going to see the extent to which they have pinned that down, and we want to have that pinned down as much as possible as soon as we can."
In order to have been granted preferred-bidder status, EWI had to convince the OUR that it was able to secure the necessary finances to undertake the project. Having cleared that hurdle, the regulator has to satisfy itself that the investor is able to unlock the funds to undertake the project.
Gordon said the process is not unusual, arguing that backers are only willing to deliver on commitments whenever projects appear live.
"During the early stages, the financiers will give letters of intent, and usually they don't make their final decisions until everything is in place. (When) the agreement is in place they will analyse that and will be getting ready to make their final decisions, but you won't get the full commitment until there is a project, and there is a project only when the licence is issued," Gordon said.
The OUR has approved the signing of the power purchase agreement (PPA) signed recently between the Jamaica Public Service Company Limited (JPS) and EWI. The PPA does not become effective until the OUR makes a recommendation and the licence is issued by the energy minister to EWI.
Critical to the issuing of the licence is the conducting of a due diligence assessment of EWI to ascertain whether there are matters that would preclude the OUR from recommending the issuance of a licence to the entity. The assessment focuses on matters such as criminal antecedence, national or international security concerns, or whether the company has been placed on watch or banned listings.
"What we have seen so far is that there is no adverse trace ... so that is a good step, and normally when licences are being considered that is the first step, and once there is no adverse trace then there is a good chance," the director general said, while adding that the regulator would soon be making its recommendation to Paulwell as to whether he should issue a licence.
"To the extent that this project is delayed, we are paying an estimated US$1 million (around J$100 million) more per day than we should be paying for our electricity production, and so time is of the essence in terms of getting this done," Gordon said. "We are moving as fast as we can in terms of what we have received."