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Amaila: False Dilemma

Aug 12, 2013 Editorial

Now that Sithe Global has officially confirmed its withdrawal from the Amaila Falls Hydro-Electric Project (AFHEP), maybe we can all look at the entire episode somewhat more dispassionately.
First of all, we have to point out that contrary to what the government claims, there has not been a single Guyanese or Guyanese entity of note that has been opposed to the proposition that Guyana needs to develop its hydro-electric potential.
This is not an inconsequential circumstance. In our estimation, the government should have used this unanimity to bring together the country in our quest for development rather than dubbing all those that questioned the project as “anti-nationalist”. What the government has done is to create a “false dilemma” in the minds of the populace whenever it pronounced on AFHEP.
The fallacy of the “false dilemma” arises in a situation when it is presented as if there are only two alternatives for one to choose between, when in fact there can be at least one more. We commonly refer to such situations as being presented in “black or white” when there can be several shades of grey.
In the case of AFHEP, the government presented two separate false dilemmas. The first, broader one that on the development of hydro power, it was either AFHEP or nothing else. Now that the issue has been thoroughly ventilated, we now know conclusively that Amaila Falls is only one of several sites that might be suitable for our initial foray into hydro-electric power generation.
We do not want to rehearse the facts that have been exposed as to why the physical features of the Amaila Falls option might have pushed up the costs significantly. What we are saying is that the other options should have been considered.
The other more specific false dilemma presented refers to AFHEP itself: that the costs and model of financing presented by the developer Sithe Global/Government of Guyana (GoG) have no alternative formulations that might generate significant savings for the country.
Again from information presented, we now know that there have been so many variables that could have been renegotiated in our favour and it is rather incredulous that the government would be offended that their choices were questioned.
Take for instance the borrowing costs on the huge US$500 million loan from China Development Bank (CDB) at 8.5%. Now China Development Bank does not offer concessional loans, and their interest rates tend to be higher than those offered by China Exim bank.
This rate is extraordinarily high in comparison to the loans that the bank has made infrastructural development to, for instance, African nations especially when Chinese firms are involved in the project. In the case of AFHEP, China Railway will be responsible for building the dam and power generation plant.
At least we should sit down with the China Exim Bank and investigate whether we can obtain the necessary financing at concessionary terms. If this is not successful, and CDB is the only financing agency with the deep pockets still willing to finance AFHEP, we are convinced that better rates can be obtained because of the tie in with the Chinese constructing company.
For instance, Ghana has recently negotiated a US$3 billion line of credit from CDB. The first tranche of $1.5 billion will have a 20yr maturity, including a 5yr grace period. The interest rate will be 6 month LIBOR (London Inter-Bank Offered Rate –  presently .4% ) plus a margin of 2.95%, with a commitment fee of 1% and an upfront fee of 0.25%. Which all adds up to 4.6%.
We support President Ramotar’s statement on AFHEP to the extent that we cannot let the opportunity to begin our hydro-electric power generation slip from our grip.
As should be clear by now, this support does not mean that we simply have to find another equity partner to replace Sithe Global. We should cancel their licence and begin structuring the project immediately as part of the overall development of our hydro power potential.

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