Construction unlikely before 2015 – Engineer

Nov 07, 2012 News

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Amaila Falls Hydro Project…
The Amaila Falls Hydro Project will be facing major delays and is unlikely to start anytime soon, a senior engineer has said.
According to Charles Sohan, from all indications, delays in road construction and the completion of a feasibility study of the project coupled with the due diligence by the Inter-American Development Bank (IDB), will contribute to the setback.
The IDB has already signed a mandate letter, paving the way for due diligence to begin.
The Bank is being sought after for US$175M to complete the consortium of investors in the project which has an announced price tag of US$840M.
Sohan, who has extensive engineering experience locally and internationally, including working with the US government, also believes the final costs could climb even further with the US elections yesterday.
“Any new government in the US will have to hike interest rates to help bolster that country’s struggling economy,” he said. This definitely will have negative implications on the price tag that Sithe Global, the developer of the 165 megawatt project, has placed on the table.
Sithe Global has said that it is hoping to start construction by mid-2013.

While Guyana has already locked in costs for materials to be used using the 2013 timeline, Amaila Falls Hydro Inc, Sithe Global’s operating company that will manage the project locally, has warned that fluctuations of the US dollar can affect the final price.
Sohan, in a letter published in Stabroek News yesterday, argued that financial closure, the key element to get this project started, is still in the dol¬drums. He noted that the IDB’s Country Representative reportedly indicated that IDB had started a due diligence process for the project which will finally determine whether or not the bank finances the project.
“Further, a decision will only be made after Sithe Global provides the IDB with a feasibili¬ty study on AFHP (Amaila Falls Hydro Project) to enable its Specialists to review and appraise the project from many perspectives to determine its economic and financial viability,” the engineer said.

NO FEASIBILITY STUDY
He believes that a feasibility study has not been completed and this will further delay the project.
He explained that the project has to show that it can generate enough revenue to service its debt, grow the economy and not become another Government “’sinkhole’ like the Skeldon Factory”.
Sohan insisted that the mandated feasibility study which the bank’s specialists will review to ensure that Guyana’s limited resources are put to their best possible use will be the hallmark on which the IDB’s Board of Directors make their decision as to whether the AFHP qualifies for a loan and this crucial decision can very well go one way or the other.
Among other things, the bank will want to examine GPL management’s technical capacity and its ability to reduce electricity losses from thefts and system inefficiencies.
“This has been a tall order for GPL to achieve over the years as GPL’s customers from Lethem to Upper Corentyne can attest to its continuous poor performance in these areas. Therefore no firm commitment to finance AFHP is likely under five years while certain assurances may have to be complied with before loan disbursement… if any is made,” Sohan said in the letter.
Speaking with Kaieteur News yesterday, the engineer pointed out that it was only recently that tenders were opened for a key section of the Amaila Falls access roads, leading from the Kuribrong River to Amaila Falls. With mobilization and construction time, it is likely that the construction over rough terrain will not likely be completed before next year-end. These access roads have to be completed before actual construction of the hydro project begins. Government has said that construction time would be by mid-2013.
“Therefore by the time an award is made and construction of the Bridge/Section 7 completed and becomes operational, it will be 2015, given the Government’s penchant for generous time extensions to contractors.”
Sohan said that government and the developers should be forthright and admit that the project is evolving.
RISKY UNDERTAKING
According to the engineer, IDB’s participation in the project would be key from the Chinese perspectives, as no entity or government would want to foot such a hefty bill, sharing some of the risks.
He believes government could consider a possibility of allowing locals in investing in the project, similar to the Berbice River Bridge, which is a public/private partnership.
An important aspect to note, he said, would be that IDB would have conditions to its loan, including improvements to GPL’s systems.
In September, government announced that Sithe Global had signed a US$506M Engineering, Procurement and Construction (EPC) agreement with China Railway First Group (CRFG) for the project.
The 165-megawatt project is to be built in Region Eight with funding coming from a number of sources including US$100M in equity from the Guyana government.
Some 70 per cent of the total funding will be coming from the China Development Bank and the IDB.

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