INVESTMENT outfit Sterling Asset Management plans to list a power entity on the Jamaica Stock Exchange as part of its plans to raise US$50 million in equity and debt under the 360 megawatt (MW) project.
Last month, US-based consortium Azurest-Cambridge won the bid to build the plant, which is set to cost some US$690 million. Azurest will raise the bulk of the funds in the US and other major metropoles while Sterling would raise some $50 million -- but the exact amount could be more or less dependent on the local market needs.
The plans to list were hitherto largely unknown, but the process should begin early next year, when Sterling will seek to raise the funds throughout the Caribbean, including Jamaica, according to Charles Ross.
"We would raise the funds in a mix of debt and equity," the prinicpal of Sterling Asset Management told the Observer in a Monday phone interview. "Our checks with [investors] show that there is a significant amount of interest in equity. So some would be raised from equity in addition to debt. There will be a listing on the stock exchange so investors will be able to monetise their investment."
The debt raised would likely involve the issuance of a bond. Contrastingly, Ross explained that the listed entity would probably be a subsidiary of the consortium rather than the parent itself: "In all likelihood it would be a special purpose vehicle. It won't be the consortium members but rather a local part of that entity".
Ross explained that the timeline for raising funds would first involve Azurest-Cambridge paying US$6.9 million, or a one per cent deposit bond early this month, followed by negotiating a power purchase agreement (PPA) with the island's power distributor, Jamaica Public Service company (JPS).
"That could take between two to three months," said Ross on the PPA. "So I would imagine by early next year, maybe January or February, it would be raised based on the need basis. So the timing is dependent on the implementation schedule."
The consortium includes Azurest Partners, a US-based business strategy/capital-raising firm; Cambridge Project Development Corporation, a US-based engineering, energy and environmental consultancy; Inergix Corp, a US-based energy sector-focused project management consultancy; and Waller Marine, a US-based ship engineering company.
In September, the Azurest consortium told the media that it would fulfil the US$6.9-million ($703m) bond deposit requirement. The energy regulator, Office of Utilities Regulation (OUR), requires payment, otherwise the opportunity will cede to runner-up Energy World International to supply the project.
The reported key to the Azurest proposal relates to sourcing smaller ships that economically transfer gas from the US to Jamaica. Azurest partnered with Waller Marine to specially manufacture cost-effective LNG ships of one-fifth of the size, or approximately 40,000 cubic metres compared with usual 200,000 cubic-metre fleet size of LNG ships.
In a summary of the evaluation of bids to supply the base load generating capacity to the national grid, the OUR said that Azurest-Cambridge scored the highest on the economic evaluation while Energy World International scored the highest technically.
But project consultant Mott MacDonald determined that none of the four bidders currently achieve the minimum 75 per cent of 'ability to finance the project' in order to qualify for selection.
"In the event of selecting the preferred bidder, Mott MacDonald would expect further investigation/ due diligence of the bidder before contractual negotiations are undertaken," said the OUR report. "It should be noted that such due diligence will help to mitigate the exposure to possible high levels of risk associated with proceeding with any of the bidders based on the results of the financial evaluation."
It recommended "further study of the financial strength of Azurest-Cambridge".
Other channels of financing will become available to the US-based consortium.
The International Finance Corporation (IFC) plans to issue a local bond to raise the equivalent of US$500 million ($51 billion) in Jamaican currency.
The investment arm of the World Bank already received approval from the finance ministry and the Bank of Jamaica to proceed with the bond issue, which is aimed at attracting local investment that would be channelled into major infrastructure projects.
It will mainly serve to provide investors in capital projects, which eventually generate revenue in Jamaican dollars, access to large sums of financing in local currency to eliminate the risk of exposure to devaluation.