That Azurest Cambridge Consortium, how is it likely to work ?

The views expressed below are purely my own and does not reflect that of any one in the consortium. I have made a number of assumptions based on my knowledge of energy sector and familiarity with the operations of at least two companies in the consortium. I am going to do a quick review of each of the partners and what I believe will be their role in the completion of this project.

 

Azurest Partners LLC

Formed in 2012 and consist of at least three employees, one is Managing Director based in New York and another based in the UK.  These are the guys responsible for pulling the rest of the partners together and I see their role also as providing access to financing for the project. Sterling Asset Management  has pledge to help find US$50M from local sources ie Jamaica . What will be the impact on the US$, we will have  to wait and see.

 

Inergix Corp

These folks are involved in the energy business but there role seems to be mainly from provision of financing as well as advisory role in forging partnerships with those who actually can deliver the various components of the project. I see there role being one of assisting in obtaining financing for the project. I see these guys also working on LNG supply contracts as well as playing a significant role in signing a Power Purchase Agreement (PPA).

 

Wartsila

These folks have been around for sometime and have been involved in the production of generator facilities around the Caribbean Region and around the world. They were mainly into the production of diesel generators but have not become involved in the production of gas fired generators as well a dual fuel technology for electricity generator. I see these guys providing the actual Generators, which would delivered to Waller Marine at their Texas facility in the USA.

 

Cambridge Projects

These folks are big on project management and therefore there role will most likely be managing the various aspects of the project to bring all these p;arts seamlessly together. They most likely will be working directly with Wartsila during the production and delivery of the generators needed for the barge and will most likely be working with Waller Marine, who will be constructing the barges.

 

Waller Marine Inc

These are the guys who will actually be constructing and delivering the barges to Jamaica, they appear to have very good expertise on these kinds of projects and only recently completed a 2 x 171MW barge, which is ranked today as the single largest floating generating facility in the world.

The big question in my mind is who of the group will be responsible for long term operations and maintenance of the Generating facility ie who will be in it for the long haul.

 

Waller Marine will be simply constructing and delivering the plant, they have no experience in long term power generation contracts and delivery of power to any grid that I am aware. I see their exit once  the barge is delivered and commissioned into operation.

Wartisla is in the business for providing power generation equipment and as far as I am aware has not long term contract in the actual delivery of electricity to any facility anywhere in the world. Once Wartsila deliver the generators to Waller Marine I am not seeing them having any major involvement in the rest of the project save and except of start up and probably long term maintenance contract as well as contract  for the supply of spare parts.

Cambridge Projects as the name suggest actually deliver the final project over the owner and I see their relationship ending at this point.

That leaves two partners from the initial 5

Azurest Partners, who again was responsible for bring it all together and providing financing. I see them hanging around more from an advisory and financing role , but not the operation of the generating facility.

That leaves us with just one more partner and that is  Inergix Corp.

Inergix Corp will most likely be around to ensure the supply of fuel LNG for the project and maintaining contracts for the provision of fuel for the long term, but I do not see them running the generation facility and I see nothing to suggest they have any management contract anywhere for the supply of electricity.

The question then becomes, who will be the partner who will actually be responsible for management and daily operations of the generation facility. Will Azurest be looking to sign management contract with new partners for this aspect of the  360MW generating plant.

This a question that needs answers,

Next I will look at how are we likely to benefit in terms of an impact on the likely final price that consumers will be required to pay for electricity.

Just to make a few points here however. The price of US 13.85 cents per KW is the price that Azurest believes it can generate electricity at and will then in turn sell power to the JPS, who will add their markup and then sell it to the consumer.

So folks what you will end up having, is the electricity generator will sell to make a profit and  RIO on about 20%, JPS will look to buy cheap power add its mark up and then sell it to the public, so only God knows what the final price of the commodity will be.

Don’t be fooled by US 15 – US 20 cents per KW as the final price to the consumer you hear been banded about, frankly we don;t know as yet, but by next week I should be able to come up with some sort of a modeling to determine a band that represents the most likely final price of the commodity.

When the plant become operational it will take out approx 360MW being supplied not by expensive ADO or Bunker C fuel ( HFO) and will leave JPS with about an equal amount of idle generating plant. There is a cost associated with this and its called stranded cost and must be accounted for the the calculations for the final cost of electricity to the consumer.

In simple terms JPS MUST be compensated for the equivalent of generation capacity that will be displaced once the 360MW of power is placed on the grid . This essentially means it not as simple as a one for one swop ie we simply don’t take out 360 MW from existing supply and replace it it 360 MW of cheaper produced electricity, but more on that in my next piece.

The best for consumer to see big reduction in electricity rates is to give the Independent Power Produces IPP access to the grid, thus allowing them to pass on maximum savings to the consumer, that is true deregulation.

Electricity Generation has been deregulated for sometime now, but the transmission and distribution of electricity has not been and herein lies the real problems.

Close to 23% of power  generated is lost to theft and transmission and distribution losses and so Jamaicans can get big savings if this area is addressed as a matter of urgency.

We are now embarking on cheaper and more efficient production of electricity but is put all that into a system that is very inefficient thus nullifying close to 10-12 % of the potential savings.  World class system losses is around 10% but here in Jamaica we have more than doubled that.