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Energy blow

Gov’t silent as IDB withholds funding from EWI

BY BALFORD HENRY Senior staff reporter balfordh@jamaicaobserver.com

Tuesday, April 29, 2014    

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THE country was still waiting for a response from the Government, up to press time last night, to news reports that the Inter-American Development Bank (IDB) has raised concerns about the bidding process for the proposed 381-megawatt plant which could affect financing of the project by the contractor, Energy World International (EWI).

Radio and television reports yesterday evening and last night said that the IDB flatly told EWI last Friday that it was not prepared to help finance the US$740-million project because the selection process was not in keeping with Jamaica's procurement procedures.

EWI should have posted a US$37-million performance bond last Friday but failed to do so, raising a red flag about its ability to proceed with the project.

Yesterday, Nationwide Radio, Radio Jamaica and its sister station Television Jamaica quoted from an e-mail, dated April 25, from the IDB's infrastructure division head to EWI's chief financial officer, raising concerns about the process by which EWI was selected.

According to reports, the IDB executive said that the bidding process and the ultimate selection of EWI were undertaken in a manner which is inconsistent with IDB internal procedures and policies. As such, the IDB was reported as stating that it would not be able to participate in the project financing.

However, the multilateral agency cautioned that its decision has no bearing on the capacity of EWI, but is driven solely by the procurement procedure utilised by the Office of Utilities Regulation (OUR).

The OUR said Friday that it was reviewing changes to the implementation schedule and licence granted to EWI by Energy Minister Phillip Paulwell. However, the OUR has insisted that it was not in a position to indicate whether the Hong Kong-based EWI had breached its licence by failing to post the US$37-million performance bond which was due by midnight Friday.

EWI has already paid up a US$7.37-million bid bond, representing one per cent of the total cost of the energy project. However, it stands to lose that bond, as well as the licence to construct the energy plant, if it fails to pay over the total performance bond requirement.

Paulwell announced earlier this month that EWI was granted a licence on April 4 to supply electric power to the Jamaica Public Service Company (JPS) under the terms of a Power Purchase Agreement between the JPS and EWI. He also noted that the licence was amended and restated to provide for some negotiated changes.

Paulwell has been consistent that the 381MW gas-fired power project is a "game-changer", and a first step towards reducing the price for electricity to the productive sectors as well as the wider Jamaican population.

EWI's entry into the bidding process and its eventual selection as the preferred bidder -- after the original choice, Azurest-Cambridge, failed to make the required posting of the security bid bond by the final date, October 3, 2013 -- has been a source of controversy for some time.

The OUR promoted Hong Kong-based EWI to the preferred position, further fuelling controversy over its entry to the process more than a month after the bids had closed and the fact that it referred its bid to the minister, instead of the OUR.

Yesterday, the local integrity watchdog group, National Integrity Action (NIA) issued a statement requesting "an immediate and public update" on a number of issues connected to the process, including: adjustments made to the licence; safeguards built into the licence; and changes to the anticipated 26-month timeline and expected reduction in electricity costs as a result of the renegotiated licence.

The NIA said it also wanted "meaningful assurance" that the Energy Motoring Committee (EMC) will be duly facilitated in carrying out its critical monitoring role.

"This information will help us, as interested parties and citizens, play our role in tracking this important project and holding EWI to account towards its successful implementation," the NIA said.

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