POORLY EXECUTED: Works Minister says that $100m ‘tri-fuel’ Wärtsilä engines could only use expensive diesel

Gov’t to make $10m monthly subvention to BPL’s fuel supplier to cover arrears until June 2023

NASSAU, BAHAMAS — Works Minister Alfred Sears reported in Parliament yesterday that the seven ‘tri-fuel’  Wärtsilä engines purchased by Bahamas Power and Light (BPL) back in 2019 for $100 million were “poorly executed”,  and ultimately were only able to use diesel which saw a 100 percent price increase in the past year. 

Sears, who made a statement in Parliament on BPL’s recently announced fuel charge increase, said that the move was “painful but necessary” and had come with “much forethought on the timing and impact”. Sears explained that the bulk of the fuel used by BPL has increased in cost by 100 percent this past year and that due to poor execution of the Wärtsilä  engines, BPL has had to use the most expensive fuel.

Commenting on the fuel hedge strategy left in place by the previous BPL Board, the Works minister explained, “At the time the hedge worked in our favour when energy costs were at historical lows. The global slowdown meant that supply was higher than demand, driving down prices. During this time we enjoyed a prolonged period of low fuel costs that enabled BPL to benefit from the hedging. Within the last 12 months, fuel costs have increased globally at an astounding rate due to global economic and political shocks. In fact, the (diesel) fuel used to generate electricity now… has increased within this past year by 100 percent.” 

He added, “The low strike price of the hedging strategy which was $45 per barrel, and the assumptions of relying on more heavy fuel rather than diesel, were compromised by a number of factors. Those factors included the fire in 2018 at Clinton Pier which limited BPL’s capacity to burn heavy fuel and the poor design and execution of the new Wärtsilä engines which relied also on diesel fuel. These factors eroded the benefit of the hedge strategy and placed BPL in a spiraling cash crisis.”

He noted that BPL has maintained a fuel charge of 10.5 cents per kWh. Sears said that the company now finds itself at a crossroads and must now adjust its fuel charge to ensure operational sustainability. 

“The government is cognisant that an increase in the fuel charge may not be popular at this time – but deferring it or refusing to do it will create greater hardships down the road or result in the catastrophic failure of BPL,” Sears said. He noted that even with the fuel charge increase, electricity rates will still be lower than most of this nation’s regional counterparts.

Sears revealed that BPL is preparing to integrate a smart metering and pre-paid system which he said can help drive down energy consumption and cost to consumers.

He also announced that BPL is in the advanced stages of talks with a private investor for a 60-megawatt solar plant in New Providence. Sears said the plant will decrease the power provider’s annual costs by $23 million.

The Minister further noted that beginning October 1, the government will make a monthly subvention of $10 million to BPL’s fuel supplier Shell to be applied to the company’s arrears. This arrangement will continue until June 2023.