FPL pulls out of LNG talks for Bahamas terminal
By TAMARA McKENZIE,Guardian Staff Reporter
thenassauguardian.com
Monday, June 6, 2005
tamara@nasguard.com
Florida Power & Light (FPL) has pulled out of the bidding war with the Virginia-based company AES Corp to build a liquefied natural gas (LNG) plant in Grand Bahama.
FPL Group Resources, a subsidiary company of Florida Power and Light, had initially teamed up with Texas El Paso and then partnered with the Houston based Tractebel to plan the construction of an LNG pipeline in South Riding Point.
The FPL subsidiary became a key player in the joint venture, in which its partners (El Paso and Tractebel), said it would be allowed to choose whether to use the El Paso route for a pipeline, which would end in Palm Beach County, or the Tractebel route, which would end near Port Everglades.
However, Florida Power & Light, the largest customer for natural gas in South Florida, announced over the weekend that it has decided to stop pursuing a long-term natural-gas contract.
International reports state that FPL, the regulated utility, had discontinued its plan to establish a 15- to 25-year contract for an international source of liquefied natural gas. The company said it wanted to leave itself open for ''potentially more viable options'' in the energy market in which prices fluctuate over time.
''We remain interested in LNG, but we have to know our customers will benefit before we enter into any long term transaction,'' said Terry Morrison, an FPL vice president, in a prepared statement. Companies vying to construct an LNG pipeline in The Bahamas would prefer to get long-term contracts before continuing, particularly since they are competing for the same customers.
Mary Lou Kromer, vice president of corporate communications for FPL Group, said their parent company has a responsibility to do what's best for its customers, regardless of what that might mean for another wing of FPL Group. She said the utility is required by regulators to maintain ''an arm's length relationship'' with sister affiliates.
On the other hand, the two companies that FPL Group Resources had partnered with, (Tractebel and Texas El Paso) said they were surprised by FPL Group's move to pull out and were evaluating the situation.
According to reports, Steve Stengel, Manager of Corporate Communications for FPL Group Resources, said the company was evaluating its next step. "We need to talk to our partners and our suppliers and the Bahamian government to determine what our next steps should be,'' he was quoted as saying by The Miami Herald.
Texas El Paso spokesman Joe Hollier told the Palm Beach Post that the move surprised everybody and they would have to assess their options, adding that the state of Florida still needs LNG.
Tractebel spokeswoman Paula Rockstroh told the Post: ``This is something that we did not anticipate or expect. We haven't made any decision whatsoever.''
On the local front, Trade and Industry Minister Leslie Miller told The Guardian Sunday that since FPL made the decision to no longer seek a long term LNG contract, he has received numerous calls from officials at AES as well as the FPL Group Resources, but was too busy over the weekend to get into any immediate talks.
He did state, however, that he believes that FPL made a strategic move to ensure that their future supply of LNG is not tied down to one company, given that approval has not been granted to any of the two vying energy companies.
"They (FPL) are just leaving themselves open to deal with any of the LNG companies, including AES Corp. I suspect that at the end of the day, you would probably see a situation whereby Florida Power and Light would probably join forces with AES to supply them with their gas and become a joint venture partner in this project in The Bahamas. This is what is likely to happen," Mr Miller predicted. He added that because AES has satisfied the demands of the government and the BEST Commission, it would only "make sense" for FPL to partner with AES if it wanted to supply LNG in the long term.
Mr Miller also alleged that some two years ago, FPL officials had approached him with this same proposition and expressed an interest in wanting to join forces with AES.
"They said they wanted to join forces with AES and they wanted to have a 40 percent interest in this pipeline project in The Bahamas, then they deviated from this point and said they wanted to be a major player and be the major shareholder in the project. Then they went and hooked up with Tractebel in the pursuit of this objective in having a partner.
"It has now gone back to square one now, where their (FPL Group Resources/Tractebel/El Paso) site was turned down by the government, but I think you are going to see at the end of the day, some agreement probably between FPL and AES in supplying fuel in the future," Mr Miller claimed. "We just have to wait and see what happens," he said.
Meanwhile, as Tractebel's entire proposal may have to be revamped, Virginia-based AES Corp could be one step further to getting government approval. The company is still awaiting the green light from the government, of which a yea or nay was promised since late January. However, Prime Minister Perry Christie has had to deal with the numerous complaints from Cat Cay residents and investors about having an LNG facility at Ocean Cay, and a decision never came. And with the recent illness of Prime Minister Perry Christie last month, and his doctors' insistence that he only accept "light" duties, the heavy decision of granting an LNG approval may be far from tomorrow.
Up to press time on Sunday, The Guardian could not reach any official at AES for a comment on FPL's decision to no longer seek a long term LNG contract, but international reports indicated that Robin Pence, spokesperson for the rival AES project, expressed that Florida still has an enormous needs for natural gas, and AES would continue to move forward with its plans.
In the U.S., Tractebel North America Inc. is the number one importer of LNG and is one of the largest independent power producers. However, in its bid to construct an LNG pipeline from Grand Bahama to Florida, the company last year teamed up with Texas El Paso and Florida Power and Light Group Resources.
The energy conglomerate wants to run a 24-inch pipeline some 90 miles from a natural gas terminal from Grand Bahama to Port Everglades using a deep-water port. The Tractebel project will transport natural gas via pipeline from the planned liquefied natural gas storage and re-gasification facility of its affiliate, Tractebel Bahamas LNG Ltd in Freeport, Grand Bahama. The U.S. segment of the pipeline would be on land in Port Everglades, Florida, and then connect onshore with the Florida Gas Transmission system adjacent to Florida Power and Light's Lauderdale power plant.
However, Tractebel's bid to construct a pipeline at Freeport Harbour and at South Riding Point had been rejected in April by the BEST Commission. But, regardless of these rejections, Manager of Corporate Communications at the Florida Power and Light, Steve Stengl, told The Guardian that Tractebel was still optimistic that it would find a remote location in South Riding Point or in another area of Grand Bahama.
Tractebel was eyeing The Bahamas because they needed access to a deep-water port and adequate land to build LNG storage facilities, which were non-existent on the Florida coast. He said the South Riding point area was ideal, as it had the land and a deep-water port, and its nearest neighbour was a mile away.
Various countries are looking for ways to increase their supply of LNG, as there is presently a worldwide demand for natural gas that surpasses the need for any other type of fuel.
Since the late 1990s, the U.S. has granted permits for dozens of major onshore and offshore natural gas pipeline projects, totaling more than 7,800 miles, representing an industry investment of more than $10 billion.
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