Aruba LNG Negotiation
K&M was contracted to assist a private client on the negotiation of the Regasified LNG Sale and Purchase Agreement (RLSPA). A draft version of the RLSPA was submitted to the client on March 31, 2021. In addition to the RLSPA, the LNG supplier proposed that the client and themselves enter into a Pipeline Interconnection Agreement (PIA) that will govern the construction of the pipeline from the LNG terminal to WEB’s battery limit. K&M will review and comment on the RLSPA and PIA.
WEB is working with its parent company (Utilities Aruba) to decarbonize its generation matrix and meet the goals set by the Paris Agreement. To this end, WEB wanted to develop a set of decarbonized long-term generation scenarios for Aruba. These scenarios will include combinations of different technologies, including thermal (natural gas), solar PV, wind, lithium battery, and green hydrogen. K&M will assist WEB to develop a detailed model to estimate the Levelized Cost of the Electricity (LCOE) and emissions for each generation scenario.
K&M was retained by WEB Aruba N.V., Aruba’s main power producer, to review the business case (Phase 1), identify the optimal power generation technology and configuration (Phase 2), and competitively procure supply of LNG (Phase 3) for an LNG-to-Power project. WEB Aruba N.V. is planning on developing an LNG-to-Power project to help reduce the cost of electricity from HFO-fueled power plants.
As part of its work during Phase 1, K&M performed an independent review of the business case to ensure consistency and coherency throughout the document, as well as a review and audit of the economic and financial models. During Phase 2, K&M performed technical due diligence on the existing generation system, identified eight technology and configuration options (including reciprocating engines, gas turbines in simple and combined cycle) for improving the efficiency of the existing system, calculated the levelized cost of each option (with HFO and natural gas), and recommended the optimal option.
After confirming that there is a business case and selecting the optimal generation technology and configuration, K&M commenced work on Phase 3, which consists of assisting WEB manage a process for competitively selecting an LNG supplier. The process includes three steps: discovery (prospective suppliers are identified and consulted on their interest on the project), prequalification, and a request for proposals. K&M is performing, under a separate contract, a pre-FEED study of the terminal for receiving, storing and regasifying LNG.
Aruba has approximately 15 MW of installed solar PV capacity, of which 9 MW are rooftop installations at residential, commercial or industrial user’s premises. These installations were developed under an existing distributed generation regulation issued in 2014. In 2019 solar PV rooftop installations are expected to reduce grid sales by around 1.1%, and this is expected to increase to 3% in 2025. WEB (Aruba’s power generation utility) is concerned about the impact that lower grid sales is having on its generation business, and is also interested in exploring how to participate in the rooftop solar business. WEB engaged K&M to identify and evaluate business models for WEB’s involvement in the development of the rooftop solar PV systems for consumers in Aruba.
WEB currently has an installed thermal capacity of 213 MW, including steam & turbo generators (121 MW) and Wartsila reciprocating engines (92 MW), both of which are running on HFO. The steam & turbo generators are being replaced with dual fuel 6 x 17MW 50DF Wartsila reciprocating engines. WEB wants to switch this generation from HOF to natural gas using imported LNG. LNG will be received, stored and regasified at an LNG import terminal. WEB perform a pre-FEED to analyze 15 terminal location and configuration options and selected a selected a land-based storage and regasification facility at the Barcadera port. the LNG storage and regasification facility will be located on a new reclaimed area; LNG will be stored in a full containment tank with a net storage capacity of ~19,000 m3. Maximum cargo lot size for LNG deliveries will be 9,000 m3. LNG will be regasified utilizing in-tank booster pumps and ambient air vaporizers. Boil-off gas will be managed using send-out gas compressors. Natural gas will be delivered to the WEB power plant via a 2 km 6” gas pipeline. Dredging to ~8.5 m will be undertaken to provide a new berth and turning basin such that the Terminal can safely receive LNG carriers of up to 7.5 m draft, 145 m LOA and 17,000 gross tonnage. LNG carriers will berth on newly built quay the south side of the newly reclaimed area located to the east of the existing port quay. This quay and mooring dolphins will be constructed, and mooring systems will be installed, including Quick Release Hooks (“QRHs”). LNG transfer system (and vapor return system) from LNG carriers to/from shore will utilize industry standard aerial cryogenic hoses, Emergency Release Couplings (“ERCs”) and hose support saddles (all within the scope of the Terminal). LNG will be unloaded to the storage tank via cryogenic pipeline. The main objective of this FEED study is to perform Front End Engineering Design for the selected LNG terminal location and configuration.
K&M is overseeing site studies required to obtain the data and information needed to perform FEED which includes FEED on marine infrastructure; LNG storage, regasification and topside facilities; gas pipeline and receiving facilities; and other infrastructure / facilities required for the LNG terminal. K&M is developing Class 3 cost estimates for all the works and equipment required by the LNG terminal. K&M is also conducting an Environmental Impact Assessment (EIA), and assist WEB to request and obtain permits for construction, dredging and operation of the LNG terminal. K&M will develop technical specifications for the EPC contract(s) Request for Proposal (RFP) package.
K&M was engaged by WEB Aruba to evaluate the financial feasibility and potential tariff impacts of solid waste management investments aimed at reducing landfill waste on the island: a new sanitary landfill, hazardous waste processing facility, and a waste to energy project using mass burn incineration. K&M developed a financial model to estimate tariffs across the waste management and disposal value chain and comparing these tariffs against suitable benchmarks to evaluate the economic viability of the projects.
Water en Energiebedrijf Aruba N.V. (WEB) is planning to develop an LNG import terminal to provide LNG/gas to a power plant with a capacity of around 200 MW. WEB engaged K&M to assist it identify and analyze various LNG import terminal options and perform pre-FEED and class 4 cost estimates on its preferred option. K&M’s work included estimating demand for LNG, identifying 15 options for importing LNG (including FSRU, FSRBs, FSUs, onshore regasification and storage, two sites, gas pipelines, LNG trucking, and ISO containers) and performing conceptual design for each option. K&M developed class 4 cost estimates and a model for estimating LNG ex-ship price for each option (based on the optimal LNG supply route and optimal size LNGC), and performed preliminary environmental and social impact analyses of each option. K&M developed a financial model to estimate the levelized cost of gas at the power plant battery limit for each option and identified and analyzed several options for developing the terminal, including EPC and Build Operate Transfer (BOT) contracts.
Based on this analysis, K&M recommended an onshore storage and regasification option with a terminal that can receive LNG carriers of up to 8,000m3 and a 2 kilometer pipeline to deliver gas to the power plant. Based on K&M’s results, WEB decided to proceed to performing FEED on the LNG terminal and competitively procuring the LNG supply.
K&M is advising WEB Aruba, the utility responsible for providing water and electricity in Aruba, on evaluating options for the development of a seawater reverse osmosis plant. K&M is investigating whether the least cost option would be for WEB to extend its current water supply contract with Suez or build a new water treatment facility. K&M gathered data and reviewed information, including water demand and production data, water purchase agreements, and WEB’s preexisting internal analysis of water supply options. K&M developed an options evaluation model that includes seasonally adjusted demand and production and calculations of the least cost of water (LCOW).
K&M was contracted to assist WEB to perform a background check of five companies (“Tenderers”) that will be invited to submit proposals for a turnkey contract for the construction of the 18,000 m3/day seawater reverse osmosis (SWRO) 3 plant in Aruba. The background check will cover the Tenderer’s activities in their country of origin (location of their headquarters) and their subsidiaries in countries where they are active. The background check will aim to identify red flags that WEB could consider when deciding if any of the five Tenderers should not be invited to submit a proposal. To this end, the background check will include a review of the legal, reputational, and financial background of each Tenderer.
K&M will first determine the country where the Tenderer has its headquarters. K&M will then review FATF publications, including the latest Consolidated Assessment Ratings and High-Risk Jurisdictions-Subject to a Call for Action to determine if the Tenderer country of origin has any strategic ANL-CFT deficiencies. K&M will identify the Tenderers, if any, whose country of origin is listed as a High-Risk Jurisdiction or rated as “Low Level of Effectiveness”, and/or has strategic technical areas rated as “Non-compliant”.
K&M will assess if any of the five Tenderers is included in the list of ineligible firms published by the World Bank, EBRD, IDB, and other multilateral financial institutions. Ineligibility is determined when a firm has used corrupt, fraudulent, coercive, or other undesirable practices. K&M will also search online for the name of the firm in combination with words such a “corruption”, “corrupt, “fraud”, “fraudulent” and “coercive” to find any news articles, publications, reports, etc., that mention the firm as an entity engaged in undesirable practices.
K&M will review the Dun & Bradstreet Comprehensive Credit Reports to determine if any of the five Tenders or their subsidiaries and branches located in the countries listed in the project description have ongoing legal disputes. If any of the Tenderers has ongoing legal disputes, K&M will search online for information available about the dispute, the risk that this dispute could present to the Tenderer, and the Tenderer’s ability to implement the SWRO project.
K&M will perform the track record assessment by searching online for the Tenderer’s name along with words such as “project failed”, “project terminated”, “project delayed”, “project over budget”, “did not meet performance guarantees”, etc. K&M will also search the DesalData database for information on projects implemented by any of the Tenderers, and that failed to meet design specifications or failed for any other reasons.
K&M will calculate financial ratios that provide an indication of the Tenderers’ financial strength relative to the size of the SRWO 3 turnkey contract and performance guarantee. These ratios include net worth / SWRO 3 capex; average 3-year gross revenue / SWRO 3 capex; net worth / value of performance guarantee; etc. K&M will obtain the information to calculate these ratios from the financial statements included in the Tenderer’s latest annual reports. K&M will also use Dun & Bradstreet credit reports obtained to perform the check of legal disputes to obtain additional information on the financial strength of the Tenderers and their subsidiaries.
Finally, K&M will prepare a PowerPoint presentation with the findings of the background check for each company and with any recommendations that result from this analysis.