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Jul 26, 2013 Editorial

It does not appear that the storm over the Amaila Falls Hydro-Electric Project (AFHEP) will blow over very soon. Behind all the inevitable politicking that accompanies such discourses and debates on national issues in Guyana, it is clear that there are some valid concerns that the government must address. The primary one has to do with whether Guyana will be getting value for the money it will be expending for the supply of electricity.
It is heartening to acknowledge that not even the fiercest critic of the AFHEP is against Guyana using its abundant hydro resources to generate electricity. As has been pointed out, Hydro-power has been the dream of administrations since the 1970s. There have been questions raised, however, by APNU, whether the capacity of the AFHEP will be sufficient to supply the needs of the country when the project is completed.
While the AFHEP’s top-rated capacity of 165 MW might appear adequate at this time, the more realistic figure should be the 110MW we are promised as the minimum output, which can be occasioned to any number of factors, especially diminished water supply. This supply will barely suffice for present needs and thus the criticism cannot be dismissed out of hand.
Within the calls of “value for money”, there have been specific questions raised on allocations that must also be addressed. In our edition of yesterday, there was a letter, for instance, that asked, “Why is a sum of US$40 million being charged to the Guyanese people for “additional works” on top of the US$517 million that was quoted by the Chinese Contractor, when we already have US$26 million assigned for “contingency cost”?” Also questioned was US$24 million for “start-up cost” when US$27 million was already allocated for “development cost”, which is supposed to include “start-up costs”. Finally, the letter queried the cost item labelled “others” for US$16 million. This claimed, unnecessary charge of US$80 million is certainly not chicken feed, and we hope that some clear responses will be forthcoming.
Questions have also been raised on the public-private partnership (PPP) model that is being touted as a Build, Own, Operate and Transfer (BOOT) venture. In this model, the financing and concomitant risks should be assumed by the Operator, in this case, Sithe Global. Yet, in the case of AFHEP, Sithe Global is only providing/sourcing US$150 million (@ 19% interest) of the US$840 million touted for the entire project. Guyana will be borrowing and injecting US$584 million in addition to the US$100 million sourced from the Norway Funds. Yet Sithe Global will have 60% ownership and the Government 40% of the Amaila Falls Hydro, the Special Purpose Vehicle that owns AFHEP for the next 20 years. This anomaly needs further explication.
And underneath all the swirling figures being bandied about, we cannot ignore the elephant in the (large infrastructure) room, even when solid institutions such as the Inter-American Development Bank or the World Bank may be involved. In fact, while the World Bank is presently pushing infrastructural development, especially hydro-power projects, it is concerned about the cancer of corruption that tainted many past projects.
According to an article on the Bretton Woods Project’s website, “At a mid April panel discussion ahead of the World Bank and IMF spring meetings, Bank managing director Sri Mulyani Indrawati, herself under investigation by Indonesian authorities, conceded that the Bank operates in “many countries where the risks of corruption are very high”. She said: “We are dealing with a dilemma: How are we going to attract more public-private partnership investment without compromising the quality and the integrity of the projects”, concluding that the Bank will have to develop new frameworks on how to combat corruption if it is to expand its public-private partnerships.”
As we in Guyana embark on these large infrastructural projects such as the AFHEP, CJIA expansion, the Linden-Georgetown Highway etc., and we also utilise of public-private partnerships to finance some of them, we must insist on “developing new frameworks” to deliver value for money and reduce possible corruption.

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