FortisBC to lose LNG contract with Hawaii

Rejected merger of two power companies means FortisBC to lose 20-year contract

The $400 million expansion now undeway at FortisBC's Tilbury Island LNG plant would have had to be roughly doubled as part of a contract with Hawaii.

FortisBC is losing a long-term contract with a Hawaiian power utility, which would have financed a plant expansion worth hundreds of millions of dollars, thanks to regulators on the island rejecting a proposed merger between the buyer and a Florida energy company.
 
In May, FortisBC announced it had signed a 20-year contract with a Hawaiian power utility, Hawaiian Electric, to supply 800,000 metric tonnes of liquefied natural gas annually to Hawaii from its LNG plant on Tilbury Island.

FortisBC's Tilbury Island LNG plant originally was used to provide LNG as a backup for FortisBC's natural gas supply. After striking deals to supply LNG for a variety of domestic purposes, including ships and trucking fleets, FortisBC commissioned a $400 million expansion of the Tilbury Island plant. The expansion is to be completed this fall.

The 20-year contract that FortisBC had signed with Hawaiian Electric would have required a further expansion.
 
Doug Stout, vice president of marketing development for FortisBC, would not say how much that second expansion would have been worth, but said it would have been double the scale of the expansion now underway.

Using natural gas was part of Hawaii Electric’s plan to phase out oil-burning power plants, replacing them with gas power and renewables.
But that plan was not aggressive enough on the renewables side, as far as Hawaiian regulators were concerned.

Hawaiian Electric had plans to merge with Florida's NextEra Energy Inc. But on Friday, July 15, Hawaii's Public Utilities Commission voted against the merger. In rejecting the deal, the utilities commission said it did not think the new company was aggressive enough in its commitment to renewable power.

“Moving forward with that (LNG contract) was dependent on the merger of the two companies,” Stout said.

“So, in fact, Hawaii Electric has withdrawn their application to the commission for their power plan and LNG. They're basically revisiting their power plan right now and deciding what to do in the future. In the meantime that means we won't be proceeding with another expansion of Tilbury, at this time anyway.”

nbennett@biv.com