Submitted by The Electricity Sector Enterprise Team (ESET) 17

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September 2014

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BACKGROUND  With the economic and social well-being of the country inextricably tied to the cost and reliability of power supply, it is imperative that a solution is urgently executed.

 The solution must include replacement of the existing baseload generating facilities with more efficient plant utilizing lower cost fuel, and clear strategies to reduce the level of losses.

 Following a series of failures over a decade to secure a suitable solution, a decision was made by Cabinet, to establish an Electricity Sector Enterprise Team (ESET)  The mandate of ESET is to manage a procurement process consistent with best practices for the development of additional base load generation capacity and related facilities in order to significantly reduce the cost of electricity to consumers.

CONSULTATIONS  ESET has embarked on a number of Stakeholder consultation meetings with key players in the Electricity market (such as regulators, policy makers, operators, multilateral agencies, etc.), including:  Jamaica Public Service (JPS), Office of the Utilities Regulation (OUR)    Bauxite Alumina sector – Jamalco & UC Rusal (Windalco & Alpart) MSTEM, Office of the Contractor General World Bank, Inter- American Development Bank  ESET has to-date: Reviewed and performed a Rapid Assessment of the existing long term strategies and plans for the electricity sector in order to develop an Integrated Resource Plan (IRP) 2

 Current net installed capacity of the Generation Plants – 848.9MW

 Almost 33% of the net thermal capacity is comprised of oil fired plants with ages over 40 years.

 Electricity demand over the past four years trended downwards – Presently the normal load is approx. 420MW and peak load is approx. 620MW)  High electricity price: ◦ Since 2004 the fuel rate has accounted for more than 50% of average electricity rates and has reached as high as 70% ◦ Between 2003 and 2013, fuel rate has almost tripled causing electricity rates to more than double ◦ Current average electricity rate – approx. $0.36/Kwh 3

Several entities have presented proposals to ESET to Build Own and Operate (BOO) new Power Generation and feedstock facilities, supplying electrical power to the National Grid. These entities include: 1. Jamaica Public Service (JPS) 2. Blue Mountain Energy (BMR)/ JPS - Jamalco 3. American Ethane – Alpart Several other entities have indicated their interest to supply feedstock (CNG, Syngas, etc) and to build Power Generation facilities – including Renewables ( Biomass, Waste to Energy, etc) and Fossil (Petcoke, etc) 4

The All Island Electric License, 2011, has been recently amended to give the company a right of first refusal to build, own and operate new Generation Power Plants to replace their existing Power Plants. To date four proposals for the provision of Baseload capacity in the short term has attracted ESET’s attention: PROPOSAL 1.

JPS has proposed the following to ESET: ◦ Replace the existing 292 MW HFOil Power Plants at Old Harbour and Hunts Bay with a 190 MW Gas Turbine Power Plant fuel with Liquid Natural Gas (LNG) by Q2 2017 PROPOSAL 2.

 Convert the Bogue Power Station by Q4 2015 - 115 MW Gas Turbine JPS’s Newest plant from Automotive Diesel Oil (ADO) initially to Propane approx 40 % fuel price reduction 5

       The Bauxite/Alumina Refinery needs: ◦ ◦ High pressure steam for power generation and process heat A more cost effective option. Current fuel used for steam generation, high sulfur HFOil, is too costly for profitable operations.

◦ A cogeneration facility which would offer the lowest sustainable energy price PROPOSAL 3 Jamalco has selected a developer to build, own and operate a coal fired co-generation facility.

Power plant will be located on the Jamalco Plant site at Halse Hall, Clarendon     Circulating fluidized bed boilers and Steam Turbine Generator Condenser Supplying high steam to Jamalco Refinery Supplying 50 MW to JPS Project completion – Q1 2018 PROPOSAL 4 Alpart has selected a developer to build, own and operate a Ethane fired combined Gas Turbine co generation facility.

Power plant will be located on the Alpart Plant site at Nain, St. Elizabeth Ethane will be shipped from the USA and off-loaded at Alpart, Port Kaiser then transported by pipeline to the power plant at the Refinery. Project completion date Q 2 2017 6

YEAR 2015 2016 2017 GENERATION PROJECTS – LCEP/IRP MODEL RESULTS • • • Development of Renewable Energy projects/ Convert Bogue to burn gas Commission the Bogue (114MW) plant to burn Propane ( initially) Add 78MW to 88MW Renewable Energy capacity (including sugar bagasse) • • • • Add 190 MW Gas Fired Generating Capacity at Old Harbour/Hunts Bay/Caymanas Convert the West Kingston (66 MW) plant to burn Gas Retire 248.9 MW of JPS’ net oil fired steam capacity Add 140 MW – Ethane powered CCGT – Alpart – install a 138KV interconnection transmission line between Parnassus and Spur Tree 2018 2023 • • • Convert the JEP (124 MW) plant to burn Gas Evaluate the possible extension of the 60MW JPPC power contract at significantly reduced fixed payments.

Add Coal Fired Plant (50MW) – Jamalco Add new power generation – possible 120MW – to be determined (TBD) 7

Benefits

◦ ◦ ◦ ◦ ◦ The expected benefits from the new Base Load Generating Plants will include the following: ◦ ◦ ◦ ◦ The new Base Load Plants would significantly lower electricity rates – approx 30% by 2018 Improved voltage stability and grid security Lower technical losses Feedstocks of New Base load power plants will result in lower Plant Stack emission levels ( SOx, NOx) than the current high sulphur HFOil feedstock.

Employment during construction period (2- 3 yrs) - approx. 800 persons at each of the three new Generating facility Production cost at the Alumina Plants would reduce and make the Plants more competitive in the Global market Direct employment at Alpart after restarting the Plant – approx. 800 persons - the only Plant in Jamaica capable of processing all types/grades of Bauxite Estimated Fuel savings US$/ annum – approx. US350 million Estimated Reduction in fuel costs > 30% 8

Next Steps

• • • • ◦ ESET has submitted the findings of the Rapid Assessment and Least Cost Expansion Plan along with indicative proposals for base load power generation to Cabinet and also discussed the proposal with the Opposition Leader & team. ESET will now: Conduct further due diligence on the proposals which include:   Further analysis of the credibility of the fuel sources Further analysis of the financing of the proposals and development plans within the framework of the least cost expansion and integrated resource plans.

Commission independent appraisals of the financial and technical proposals to ensure that Jamaica receives value for money and to support ESET in negotiations with project sponsors including JPS and the Co-gen developers.

Co-ordinate with the regulator (OUR) in engaging the prospective developers and JPS to formalize the terms of the Generating licenses and Power purchase agreements.

Facilitate permitting and other development processes in order to have project financial closing by the first half 2015 Aim for commissioning of new Generation Power Plants and fuel sources between late 2017 and early 2018.

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