IDB “red flagged” Amaila Falls Hydro project back on table

The installed PPP regime is moving ahead with the construction of the US$700-million dollar Amaila Falls hydropower project later this year according to head of the project Winston Brassington. During his address at the just concluded International Energy Conference and Expo held at the Marriott Hotel, Georgetown, Brassington said the 165 megawatt station itself would cost U$500 million. Utilizing the Build-Own-Operate and Transfer (BOOT) model the company, China Railway, would be selling power to the Guyana Power and Light (GPL) at 7.7 US cents per kilowatt hour. “This cost is largely the repayment of financing,” he said.

Brassington stated that the project is of no cost to the Government even though he highlighted that the projected operational costs to the Guyana government after it is handed over to the state at the end of the 20 years BOOT period would “probably” be 1.1 US cents per kilowatt hour. Former Minister of Finance Winston Jordan in 2015 had said that the APNU+AFC Government is prepared to explore every avenue to reduce the cost of energy, including examining the Amaila Falls Hydroelectric Power Project. The problem, however, the Minister had stated  is that as currently configured, it would not only be irresponsible, but a downright criminal act of deception, were the Government to proceed with the Amaila Falls.

Addressing the National Assembly, during his 2015 Budget presentation, Minister Jordan revealed that “investigations have revealed that at the current cost of almost $1 billion, the Guyana Power and Light Inc (GPL) would be required to make annual payments amounting to US$130 million to the operators of the hydro facility, which will total US$2.6 billion over the 20 year commitment period of the power purchase agreement.” This does not include Guyana’s contribution of at least US$160 million (US$45 million for the road, US$80 million equity through Norway, and US$35 million loan from IDB); and the garnishing of US$65 million of our foreign reserves, Minister Jordan said.

“It would be delusional to suggest that GPL has the competence to handle such a financial burden,” he noted. He pointed out that GPL is known to have poor operational, financial and technical capability. The company suffers from high energy and technical losses and fuel price volatility. “It would require not only massive tariff increases, but guarantees taxpayers, through the treasury, will provide transfers to meet this obligation,” Minister Jordan pointed out. “It also assumes that businesses would be willing to abandon their lower cost power generation and take the chance that GPL will be able to satisfy their energy demands.  Added to this, is the fact that Guyana would be left with all the contingent risks of the project,” he noted.

The identification of Amaila Falls as a potential site for hydropower dates back some 40 years. Minister Jordan noted that the new Government would welcome the diversification of our energy matrix to include clean, sustainable and affordable sources.  He said however, “It must make financial sense!” “We know now, that as configured currently, the cost of financing is too high, and that unless the price tag can be substantially lowered, we cannot proceed. In this opinion, we are strongly supported by the experts at the Inter-American Development Bank, who had considered the project to be too risky to attract the Bank’s financing,” he said.

Looking forward, the then Finance Minister said that over the next five years 2015-2020, the new Government will adopt a more integrated approach to providing for our energy needs. “We will examine all sources of energy-fossil fuels, wind, solar, bagasse and, of course, hydropower. We will commence feasibility studies for a large hydropower development in the Mazaruni region,” then Minister Jordan said. He explained that this would have been done in collaboration with Brazil; further the Government would have encouraged independent power producers and suppliers to construct energy farms and sell energy to the national grid.

APNU+AFC government  would have constructed and/or promoted the construction of small hydro systems in areas such as Moco Moco, Kato and Tumatumari, and will power all of our new townships, starting with Bartica, using alternative energy sources, Jordan stated. Successive PPPC Governments under the leadership of Bharrat Jagdeo have failed to properly plan and execute big projects in the best interest of the Guyanese taxpayers.  Only recently President Irfaan Ali announced the sale of the Enmore Packaging Plant to private investors.  Built in 2012, the plant never achieved its target of 80,000 tonnes of sugar. Some 40 employees are set to lose their jobs due to the sale.

More, In The Ring.