By Alison Lowe
Nassau Guardian Business Editor
NASSAU, Bahamas -- The government of The Bahamas this week signed a letter of intent with a company that plans to build a $625 million-$675 million waste-to-energy plant at a landfill that is projected to lower the cost of electricity and generate 2,500 construction and 400 permanent jobs.
In what may herald a significant shift in the country’s energy infrastructure, Stellar Waste-To-Energy Bahamas Limited (SWTEB) principal Fabrizio Zanaboni signed the deal with the ministry of works on Monday, according to a copy of the letter of intent (LOI) obtained by Guardian Business.
It would involve the project developer putting up 100 percent of the cost of the development of the facility, which would take two years to construct.
Upon completion, the plant will generate 70 to 80 megawatts of power daily from the burning of waste arriving at the landfill. The power will be sold to the Bahamas Electricity Corporation (BEC) for distribution via its grid at a cost of 20 cents per kilowatt hour, less than half of the current cost to consumers of power sold by BEC.
The 70 to 80 megawatts (MW) of power it will produce represents around 29 to 33 percent of the roughly 240-megawatt-power demand of New Providence daily.
SWTEB is described in the letter of intent as a special purpose vehicle, and is understood to be a joint venture between a Bahamian entity and Stellar Energy Limited. Within 24 months of the signing of the LOI, an initial public offering is expected which would involve providing some portion of the ownership of the company to the Bahamian public.
The signing of the contract demands that SWTEB is provided with 1,500 metric tons of municipal solid waste (MSW) daily over a 25-year period, along with a 25-year minimum power purchase agreement (PPA) .
‘Acceptable proof of funding’
The LOI states that the project developer has submitted “acceptable proof of funding”.
Guardian Business understands that an initial study has been undertaken which is said to show the financial feasibility of the project, while another two now must be done within six months.
The LOI states: “The Bahamas government is encouraging beneficial owners of Stellar Waste-To-Energy Bahamas to transfer to BEC or another privately or public-owned company against the payment thereof a minimum of 51 percent of the shares in Stellar Waste-To-Energy, as well as support the issuing of an IPO in order to widen its ownership to the general public within 24 months.”
This would mean that the transfer of the company’s ownership stake would occur prior to the launch of generation by the plant.
Guardian Business understands that the plant would utilize plasma gasification technology. In this process, waste will be burned at heat as high as 9,000 degrees to produce energy, with plasma rock and water produced as a by-product.
The government has yet to announce the signing. However, it comes as the government continues to delay a decision with respect to a previously announced overhaul of BEC’s operations, having indicated an interest in splitting its generation and transmission and distribution functions and bringing private companies in to obtain contracts for both.
It is unclear exactly how the signing of the agreement with SWTEB fits with that process; however, the planned investment in new generation capacity may reduce the investment any new partner in BEC would have to make and operating costs overall for the corporation.
When the government announced plans to overhaul BEC in August 2013, it indicated that renewable energy would be placed on the policy backburner until such time as that process was complete.
Meanwhile, the contract signed with SWTEB would appear to conflict with the contract that the government signaled had been signed with Renew Bahamas, given that both companies’ business models revolve around having access to the waste streams coming into the landfill.
Renew Bahamas was officially announced in June by Minister of the Environment Kenred Dorsett as taking over management of the landfill. Dorsett said that the company would establish a materials recycling facility into which waste would be fed to produce recycled materials for sale.
It is unclear how this apparent conflict between the demand for waste that would be required by both companies is to be resolved by the government.
The establishment of a waste-to-energy facility, possibly the first in the region, could be a major plus, given its potential to find a useful and productive means of disposing of ever-accumulating waste at the landfill and to lower energy costs, as well as the signal it sends that the government is finally taking concrete steps to incorporate renewable sources of power into this country’s energy mix.
However, the silence of the government ahead of the signing of the LOI is also likely to raise further concerns regarding how the government has chosen to move ahead with assessing and concluding major deals in recent times, particularly given the fact that there is an all-Bahamian group that had at one point put forward a proposal to pursue a contract for a waste-to-energy facility at the landfill.
According to internet research, Fabrizio Zanaboni, principal of SWTEB, has a background in academia, having earned a PhD in econometrics in Italy, but has spent most of his career in investment banking.
Having previously worked as head of international wealth management at BSI Generali UK Ltd, a joint venture with Generali Group, Zanaboni moved to The Bahamas in 2007 to become the chief executive officer of Banca del Gottardo, Bank and Trust Company.
Since 2008, Zanaboni’s LinkedIn profile indicates he is the major partner of a financial services boutique based in The Bahamas, FAB Portfolio Management Bahamas Ltd.
Republished with permission of the Nassau Guardian