Construction progress at Old Harbour Bay dominated Jamaica’s energy infrastructure news in the third quarter of 2018, as New Fortress Energy’s contractors advanced the marine and onshore works that would receive the floating storage and regasification unit and support the adjacent gas-fired generation plant. The simultaneous delivery of a strong summer tourism season — another record or near-record for the July-August period — and continued steady performance on the central parish road programme gave the Holness administration a positive infrastructure narrative at the mid-point of its parliamentary term.
Key Highlights
- Old Harbour Bay energy facility construction progresses; marine works and onshore civil engineering advancing toward readiness for FSRU installation, with first gas targeted for 2019.
- Summer 2018 tourism season records strong performance; JTB data shows continued growth in stopover arrivals through July and August as the underlying market expansion sustains beyond the hurricane-displacement period.
- World Bank central parish road programme approaches substantial completion on final packages; Clarendon and St Catherine contract works scheduled for acceptance by year-end 2018.
- IMF Precautionary SBA continues; fifth review underway with Jamaica expected to maintain compliance through June 2018 assessment period.
- KFTL reports second-year throughput growth at Kingston Container Terminal; new crane capacity supporting volume gains in the transshipment segment.
- Second round renewable energy projects in advanced development; two solar projects achieve financial close and mobilise to construction sites.
Old Harbour Bay: Marine Works and Onshore Construction
New Fortress Energy’s construction programme at Old Harbour Bay advanced materially through the third quarter, with the marine works required to receive and moor the FSRU progressing to a stage that the developer’s engineering team assessed as on track for the vessel’s arrival in the first half of 2019. The marine works involved dredging operations to establish the required channel depth and berth footprint, construction of the mooring structures and fenders to secure the FSRU in its operational position, and installation of the marine breakwater elements that would protect the vessel and associated infrastructure from wave action during normal weather conditions and moderate storm events.
Onshore, civil works on the gas-fired generation plant footprint were progressing, with the facility’s turbine foundations and associated infrastructure being prepared for the generation equipment that was being procured concurrently. The generation technology selected for the Old Harbour Bay project was a fast-start gas turbine configuration capable of rapid response to grid demand changes — a performance characteristic that was particularly valuable given the increasingly variable output profile of the growing renewable energy fleet on the Jamaican grid. The combination of the Old Harbour Bay gas-fired generation capacity with the existing thermal fleet and the renewable capacity would, when commissioned, give the system operator a significantly more flexible and lower-cost generation portfolio than the HFO-dominated mix that had characterised Jamaica’s electricity sector for decades.
The pipeline infrastructure that would carry natural gas from the FSRU to the adjacent generation plant and potentially to future gas users in the surrounding industrial zone was also being designed and partially constructed during the quarter. The potential for Old Harbour Bay’s gas infrastructure to serve industrial customers beyond JPS — manufacturers, bauxite processing facilities or other large industrial users — was being explored as part of a broader industrial energy strategy, though the commercial and regulatory framework for third-party gas access to the pipeline would require development that went beyond the immediate JPS-focused project scope.
Tourism: Structural Growth Confirmed Beyond Hurricane Boost
The summer of 2018 — the first full summer season since the 2017 Caribbean hurricane damage — was an important test of whether Jamaica’s strong performance had reflected genuine structural market improvement or was primarily a temporary displacement effect. The Jamaica Tourist Board’s preliminary data for July and August showed continued year-on-year growth in stopover arrivals, confirming that the underlying market expansion was real and was being sustained beyond the period of exceptional displacement demand. The growth was more moderate than the extraordinary winter of 2017-18, but positive comparisons against a period that itself had been strong testified to genuine gains in Jamaica’s market position.
The Montego Bay corridor’s hotel inventory had been incrementally expanded by the completion of new properties and the addition of rooms to existing resorts, providing the physical capacity to accommodate growing visitor volumes. Sandals’ new and expanded properties in the corridor had opened or were approaching opening, adding rooms that had been sold forward under the group’s block-booking arrangements with tour operators. The Jamaica Hotel and Tourist Association’s occupancy tracking showed average rates across the north coast corridor that were above historical seasonal averages, indicating that demand was absorbing the new supply without significant price erosion.
Infrastructure pressures associated with tourism growth continued to accumulate in the third quarter. The condition of resort access roads — particularly the connections between Montego Bay’s Sangster Airport and the resort corridor to the east, and the western road to Negril — was a recurring complaint from hotel operators whose guests experienced deteriorating road quality on the transfers that formed their first impressions of the Jamaican visitor experience. The NWA’s maintenance crews were active on these corridors, but the pace of routine maintenance was insufficient to prevent further deterioration on routes that were carrying traffic volumes above their designed capacity.
Road Programme: Central Parish Works Near Completion
The World Bank central parish road rehabilitation programme moved toward substantial completion on its final contract packages during the third quarter, with the Clarendon works reaching the pre-completion inspection stage and the St Catherine packages in the final months of active construction. The programme had addressed sections of the A2 through Manchester, sections of the A2 and connecting B-roads in Clarendon, and a cluster of important arterials in St Catherine that served communities in the corridors between Old Harbour, Spanish Town and the rural areas to the south. Final acceptance of the completed sections was expected to proceed during Q4 2018 following the inspections and punch-list rectification process.
With the World Bank programme approaching completion, the National Works Agency’s project planning division was working with the Ministry of Economic Growth and Job Creation and the multilateral lenders on the design of the next major externally financed road investment programme. The priority corridors identified in the NWA’s condition survey data included sections of the north coast highway, the key tourist access routes in the northwest, and several heavily trafficked urban arterials in the Greater Kingston area that had not been addressed by any of the recent multilateral programmes. The process of agreeing the scope, financing structure and procurement approach for the next programme was expected to extend through 2019, with construction unlikely to commence before 2020 at the earliest.
KFTL: Second-Year Throughput Growth
Kingston Freeport Terminal Limited’s operating data through the first half of 2018 showed container throughput growth compared to the equivalent period in 2017, the terminal’s first year of operation. The growth reflected a combination of CMA CGM’s decisions to route additional cargo through Kingston on specific trade lanes, the commercial success of KFTL’s outreach to additional shipping line customers, and the productivity improvements that the new ship-to-shore cranes had enabled — allowing faster vessel turnaround times that were attractive to shipping lines optimising their vessel utilisation. The transshipment segment, which remained dominant, was growing as Caribbean trade volumes recovered from the post-2008 period and as the Panama Canal expansion continued to reshape regional shipping patterns.
The Port Authority of Jamaica’s landlord activities at KCT — maintaining the quay walls, access roads and utilities that served the terminal — continued without notable incidents, though a structural survey of the older quay sections commissioned during the quarter identified areas requiring maintenance investment in the medium term. The quay rehabilitation works, which would require temporary operational adjustments at the affected berths, were being scheduled in coordination with KFTL to minimise disruption to vessel operations. Financing for the quay rehabilitation would come from the Port Authority’s own resources, as the concession agreement had placed the quay wall maintenance obligation on the landlord rather than the operator.
Renewable Energy Development and Fiscal Stability
Two of the solar projects awarded in the second renewable energy round achieved financial close and mobilised to construction sites during the third quarter, beginning the development cycle that would deliver the additional one hundred megawatts of capacity by 2020. The achievement of financial close — the point at which construction financing is drawn and construction can commence — required each project to have satisfied its lenders’ due diligence requirements on land tenure, grid connection agreements, environmental clearances and the commercial documentation of the power purchase agreement. The completion of these requirements within approximately twelve months of the contract award reflected well on the regulatory environment that the OUR and the government had established for renewable energy investment.
The Fiscal Council’s quarterly monitoring report for the period through June 2018, published in October, confirmed that the government was meeting its Fiscal Responsibility Act obligations for the first quarter of FY2018-19. The debt-to-GDP ratio was tracking on the projected path toward the sub-100 percent level that the government had targeted for 2020. The IMF’s fifth review under the Precautionary SBA was in progress, with the mission team’s preliminary assessment indicating continued compliance with the arrangement’s targets. The combination of domestic and international monitoring mechanisms was producing a steady flow of positive fiscal signals that supported Jamaica’s continued access to international capital markets at improving sovereign spread levels.
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