DO WE HAVE WHAT IT TAKES?

Apr 25, 2010 Features / Columnists, Peeping Tom

Guyana is building a hydroelectric facility. But do we have the expertise to oversee our interests in the complex and difficult negotiations that such enterprises involve? Do we have what it takes?
We do not need to reinvent the wheel when it comes to building a hydroelectric dam in Guyana.
There are examples all over the world from which Guyana can learn. What we do need to do though is to reinvent our negotiating process when it comes to these big deals since matters such as this cannot be left in the hands of NICIL and the government.
Guyana has not negotiated a deal of this magnitude in decades and given our history of controversy and sweetheart deals when it comes to foreign investment, it is important that the mistakes of the past are avoided and best practices be emulated when it comes to these investments.
There are useful examples throughout the world that should forewarn of the dangers of not following best practice models throughout the world. Just this past week, there were protests in Brazil over the bids for the construction of the Belo Monte Dam that is expected to be the third largest hydropower facility in the world, producing an estimated 11,000 MW of power or some 100 times the power that is likely to be produced by the Amaila Falls Hydroelectric Station.
The Belo Monte power station has created a great deal of controversy, with protests by indigenous and environmental groups against the construction of the dam. There were even approaches to the Courts to halt the bids for the contract on the grounds that the dam will cause widespread destruction of ecological systems and the lands of the indigenous peoples.
No such protests have been seen in Guyana where the government has allegedly already identified a contractor to build the access roads and another to undertake the construction of the dam.
It should also be noted that in the case of Brazil, they had established a ceiling price and asked companies to bid below that price.
According to a BBC report, the winning bid was for electricity to be supplied at a price of US$57.12 per megawatt.
So what was our ceiling price? And what type of contract did we negotiate? Was it a fixed price contract as was the case with the Skeldon Factory? And who negotiated the contract for the construction of the Amaila Falls Hydroelectric Facility?
Let us hope that it was not the same folks that negotiated the Sanata deal. Let us hope also that the government got expert advice before they proceeded with the negotiations.
No poor government should negotiate such deals without expert advice. The international financial institutions are always willing to provide consultants to advise poor countries on these matters but there has been no report in the media about who prepared Guyana’s negotiating brief.
Did Guyana seek any international expertise in terms of negotiating with the company that is supposed to build the dam at Amaila Falls? If so, who were the experts that were involved in this exercise, and who did they meet within the Guyana government?
Let us hope also that this was not just a one-man or two-man show but that these experts were able to relate to a wide range of persons in Guyana concerning the deal.
Of particular interest is the decision to have a separate road-building deal.
Why was the construction of the road separated from the main contract? Why did it not form part of a single contract?
This has implications for the rate of return for the investors. Those investing in the hydroelectric dam and plant will no doubt want to ensure a good rate of return on their investment.
So why was the US$15M which is needed to build the access roads, not part of this investment?
The taxpayers of Guyana will most likely have to fund this road. And if this is done, the taxpayers of Guyana get no return on their investment in the road, while the investors are spared the burden of carrying this non-remunerative cost, on the overall investment.
In short, if the taxpayers have to fund the building of the access roads, they are in effect cross-subsidizing the overall investment. There is no return on their investment, while the financiers of the dam will be smiling all the way to the bank, 20 years after construction would have been completed.
This is all the more reason why there needs to be full public disclosure as to who were involved in negotiating this deal so that if there comes a time when something has to hit the fan, then the people of Guyana will know who to hold accountable.

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