US$840M hydro project…No power sale deal signed as yet

Oct 11, 2012 News

The developer of the Amaila Falls Hydroelectric Project has disclosed that it has not yet signed agreements with the Government of Guyana and the Guyana Power and Light Inc. (GPL) for the sale of power.
According to a statement from Amaila Falls Hydro Inc. (AFH), the local subsidiary of Sithe Global Inc, the developer of the US$840M project, it has already signed several agreements. These include an “Investment Agreement” governing the fiscal arrangements and certain legal obligations related to the activities of the contractor, China Railway First Group Company Limited, (CRFG) in Guyana.
AFH said that the project, earmarked for Region Eight, reached a major development milestone in September, with the signing of key project agreements in Xi’an, China.

An artist’s sketch of the proposed 165 megawatts hydro power facility for Amaila Falls, Region Eight.

“The various stakeholders continue full development efforts and look forward to providing a public update as new milestones are achieved.”
AFH said that it received press inquiries regarding exactly what agreements were signed in September and the signatories to such agreements.
“The Engineering, Procurement and Construction (EPC), valued at US$506 million, was executed by AFH and China Railway First Group Co, Ltd. (CRFG). Neither Guyana Power and Light (GPL) nor the Government of Guyana (GOG) is a signatory to the EPC contract.”
According to AFH, it has the contractual obligation to build and finance the construction of the plant, then sell the power to GPL pursuant to agreements to be entered in to with GPL and GOG.
Also signed was the “Mandate Letter”, a letter agreement that formally initiates the documentation and due diligence phase related to the planned participation of the Inter-American Development Bank (IDB) in the financing of the project.
Last month, AFH said that it expected financial closures within nine months with construction to start by mid-2013.
AFH said that the access roads to the construction site to the falls have to be completed before the start. Government earlier this year terminated the contract with Synergy Inc, the company which originally submitted the plans for the project, after months of delays.
There had been questions about the experience of Synergy and its main principal, Makeshwar ‘Fip’ Motilall, but Government had insisted the company was competent.
AFH said that it will deliver hydro energy in 42 months.
The hydro project, the largest single investment in Guyana’s history, has been marred with questions of cost, access road construction delays and the suitability of contractors.
In September, following disclosures that Sithe Global, the developers, had signed the EPC agreement with CRFG.
There were immediate questions about the suitability of that Chinese firm after media reports revealed that last year Poland had severed a multi-million-dollar project with one of the overseas subsidiaries because of cash problems experienced by that company.
The Chinese firm reportedly demanded more money to complete the highway project, but the Polish Government refused.
There were also disclosures that the Pakistani government refused to green-light a railway project and instead started an investigation to determine how it was awarded the contract in the first place.
Regarding the price of the project, AFH last month warned that currency fluctuations could cause the price to go up.
“Signing the EPC contract provides price certainty, avoiding the risk of commodity price adjustments for a period of nine months, during which AFH will secure the project financing. The pricing is subject to adjustment in currency fluctuation until financial closure is reached, at which time the pricing will be fixed.”