Tomofumi (Tommy) Fukuda

To Tomofumi (Tommy) Fukuda lies the task of turning around the fortunes of the Jamaica Public Service (JPS) and adding value to Marubeni Caribbean Power Holdings.
Earlier this year Japan's fifth largest trading company Marubeni Corporation which is headquartered in Tokyo bought the US power producer Mirant's Caribbean assets for US$579 million. The deal sees Marubeni assuming about US$350 million in debt to take on power purchase obligations of US$153 million, bringing the deal's total value to US$1.08 billion. The Japanese corporation now has a majority stake in JPS, the Bahamas' main electricity company, three power plants in Trinidad including Powergen and two Curacao electricity businesses.

Marubeni was founded in 1858 as a textile company before becoming an industrial giant. It has a diverse portfolio, which includes power, petrochemicals, oil and gas, mining, food, automobiles, shipping, pharmaceuticals and telecoms. Despite the range of businesses, power has remained its core business.

According to President and CEO Nobuo Katsumata, Marubeni has taken significant strides in the implementation of the "G" PLAN, its medium-term management plan. From an earnings perspective, consolidated net income surged 62 per cent year on year to Yen119.3 billion, in fiscal year 2006, the first year of the "G" PLAN and the fourth consecutive fiscal year of record profit growth.

For the first half of financial year 2007, Marubeni Corporation reported a gross trading profit of Yen 281.4 billion and an operating profit of Yen 95.6 billion. Its gross income came in at Yen 123.3 billion with net income standing at Yen 80.3 billion. (US$1=Yen110.5).

With big projects in Asia, the Middle East and Africa, Marubeni is now seeking opportunities in the Americas. Not being familiar with the Caribbean, the Japanese conglomerate conducted a due diligence exercise and saw a great opportunity in JPS.

Before arriving in Jamaica, the President and CEO of Marubeni Caribbean Power Holdings Tomofumi(Tommy) Fukuda was the project manager for the acquisition of Mirant's Philippines assets which were valued at US$4 billion. The success of that endeavour gave Marubeni the confidence to take over Mirant's Caribbean operations.
Before establishing a presence in the Caribbean, the Japanese giant had acquired experience in installing power plants in Costa Rica (geo-thermal), Venezuela, Colombia (gas) Argentina and Chile.

Speaking with Caribbean Business Report from JPS' New Kingston headquarters on Knutsford Boulevard earlier this week, Fukuda outlined the challenges facing JPS.
"The first is fuel and sourcing cheaper energy, the second is generation capacity and the third is improving reliability and reducing system losses.

"If we continue to rely totally on oil it could prove disastrous for JPS. My biggest priority is to reduce our energy bill and so I am looking to use natural gas rather than rely solely on oil."

Favouring a gas facility in Bogue rather than Old Harbour

The JPS boss notes the Government's plans to introduce natural gas to Old Harbour, but he favours using Bogue in Montego Bay as a gas centre. The way he sees it, Bouge already has appropriate infrastructure and so this helps in the reduction of capital expenditure. Old Harbour has no gas facility, and to build one there would set Marubeni back some US$300 million.

"Right now Bogue has a 210 mega-watt capacity and we think we might be able to expand it to somewhere between 300 to 400 megawatts, provided we can use gas. At this point in time Bogue is our most efficient facility", he said.

"The problem we face is where will we source the gas from. Venezuela's priority is to meet domestic demand before investing considerable energy on the export market. The country's exploration and development efforts give us hope that we may source gas from Venezuela's huge fields in the near future. I must say here that Marubeni has a good relationship with Venezuela's state-owned oil company PDVSA. I am talking with Marubeni Venezuela about the possibilities of sourcing gas from that country. However, we must work together with the government of Jamaica to secure this gas from Venezuela."

He focused on the gas reserves of Jamaica's Caribbean neighbour, Trinidad, but said that the current MOU with the twin island republic meant sourcing gas from there is not likely to happen any time soon. However, Marubeni has a substantial ownership in Powergen and this may well assist it in acquiring gas from Trinidad.

"Our third option is securing gas from Nigeria because we have the transport ships to do so. We have an equity stake in an LNG project in Equatorial Guinea but Phase One is sold out so we have no capacity to export from Equatorial Guinea to Jamaica," he said

Perhaps we could do something with Phase Two. We are seriously looking at Nigeria where there are facilities and huge reserves. Furthermore, LNG ships cannot go through the Panama Canal so we have to look at gas coming in from Colombia, Venezuela, Trinidad or the west side of Africa."

Turning to coal

Fukuda also sees merit in using coal as a fuel but is quick to point out that it can be detrimental to the environment. He has been talking with the new minister of energy Clive Mullings on this subject.

"I told Minister Mullings that Okinawa Island in Japan is about the same size as Jamaica but has 1.3 million people, yet it has double the generation capacity of Jamaica.Okinawa started with oil but 15 years ago turned to coal fired generators. Now it is building an LNG-fired facility," he said.
"At this moment coal is much cheaper than natural gas. What we must do in Jamaica is diversify our fuel sources. The Government is looking at a petcoke project and that can be located in Hunts Bay. Rather than use Old Harbour for natural gas we should use Bogue in Montego Bay. We could also burn coal in Old Harbour. For five years now the government has talked about placing a gas-fired facility in Old Harbour but no progress has been made.

"From a JPS perspective, if we had a gas facility in Montego Bay then we could easily supply electricity to the hotels there and those coming on stream."

Iberostar sucks up 1 per cent of the national grid

With an explosion in hotel development projects taking place in Jamaica, there will be additional pressure on JPS to add capacity to service Jamaica's top revenue earner. Caribbean Business Report understands that the new Iberostar Hotel in Montego Bay requires 6 megawatts, that's 1 per cent of the national grid. With the new generation of hotels in Jamaica consisting of more rooms and facilities, JPS will have to step up to the plate and deliver.

"Iberostar is a big hotel and yes, it does require 1 per cent of the national grid,"

"This tells you that there is a need to boost our capacity because the country requires that we do so", continued Fukuda.

"Jamaica's total installed capacity is about 820 mega-watts with peaked demand coming in at 620 mega-watts. Now, if you lose one or two units at Old Harbour, then there is no additional power supply. It is essential therefore that we have an additional unit to ensure that everything is stable and fine. That additional unit should ideally be located at Hunts Bay and supply 30 megawatts of electricity, which would give us stability for the next two years. We are contemplating another 10 megawatts of capacity at the Bogue plant."

The JPS boss is aware that the rapid hotel construction will demand additional capacity and hence the need to bring on an additional 40 megawatts over the next two years. He announced that Petrojam is building a petcoke facility that will add an additional 140 meggawatts, but that project will be completed in another four years.

The Office of Utilities Regulation (OUR) has invited bids for a new 40 megawatt facility. Among the bidders are JPS and the Jamaica Producers Group.

Marubeni has a clear vision of what it wants to accomplish in Jamaica and wants to avoid the mistakes made by Mirant.
Fukuda is of the view that after finding itself in Chapter 11, Mirant was focused on divesting itself of its Caribbean assets and wanted a quick exit rather than seeking to add value to JPS.

"I think that Mirant didn't want to put any more money into their Caribbean assets because they didn't see them fitting into their long-term plans," he said.

"Marubeni sees tremendous potential in Jamaica and we see it as a long-term asset. I really want to make JPS the best power company in the Caribbean and I am confident that it will become so."

Part II next week.

Feeding the multitude

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Pepper Pot