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Govt. confirms there’s no final price for Hydro project

Aug 13, 2013 News

One day after a formal announcement by Sithe Global that it has pulled out of the Amaila Falls Hydro Electric Plant, the Government has come out with an attempt to clear up what it calls ‘considerable confusion’ and in the process confirmed that there is still no finalized price for project.
Government yesterday said that a final price would only be ascertained, once there has been financial closure for the project, but it does not expect this to change significantly from the recently announced US$858M.
Over the years the project price has been revised from US450M to US650M, then to US$840M and this past month it was revised upward to US$858M.
Government said it also wanted to clear the air concerning the exact costs in the project “to be borne by Guyana.”
According to the administration, the only money it is putting in the project is US$100M.
“It is very important to emphasize that NO more money will be paid by the taxpayer for Amaila Falls, and that NO government borrowing is taking place.”
What government did not say however, is that Amaila Falls Hydro Inc (AFHI), which is the private company set up to develop the project, is owned jointly by Government and Sithe Global.
Sithe Global had committed US$158M to the project and along with Guyana’s US$100M, it gave a 60/40 make-up in ownership.
What government also did not say is that Amaila Falls Hydro Inc., negotiated and secured a loan for the project. That loan is for US$500M from the China Exim Bank, along with another US$100M being sought from the Inter-American Development Bank (IDB).
The loans together with the money by Government and Sithe Global, brings the total project cost to the quoted US$858M.

Paying the Consumer Tariff
Government in its statement said there has been further public confusion in recent weeks about the expected reductions in the consumer tariff. It said the electricity tariff currently paid by Guyanese households and businesses is made up of three inputs. This includes GPL’s generation cost, the cost of transmission and distribution, and costs resulting from inefficiencies such as technical and commercial losses.
According to government, Amaila will address the biggest input cost, namely the cost of generation. It says that this will be reduced through Amaila by an initial 40 per cent in the first twelve years; by 71 per cent for the eight years after that, and by 90 per cent for the eighty years after that, based on current fuel price projections.
The billions in subsidy transferred each year from the coffers as a bailout will also be eliminated with the reduced generation costs, according to Government. It argues that even if GPL did not do anything to reduce its operational inefficiencies, the reduction in tariff to be paid by consumers would be down by 20 per cent.
What the government did not address is the fact that even with the reduction of generation cost through Amaila, GPL will still have to ensure that its traditional mode of generation remains on stream in addition to garnering revenues to pay for its non-generation expenditures.
The Government also did not say that there was never a finalized Power Purchase Agreement for the sale of electricity to GPL from the Amaila Falls Hydro Power Plant.
In its argument, government concluded that Guyana in paying for the Hydro Power Plant will only be putting US$100M taxpayers’ dollars, with the remaining payments to be made via consumers paying for electricity.
It however ignored the fact that it is being asked to guarantee the payments to be made by GPL with taxpayers’ dollars, should it have a shortfall.
Government also ignored the fact that it is being asked to guarantee payments using taxpayers’ dollars in contravention of the Law.
The Guarantee of Loans (Public Corporations and Companies) Act which government is using to guarantee the repayments to Amaila Falls Hydro Power Inc, specifically says that the loans to be guaranteed have to be from a lending agency.
Government has undertaken to guarantee payments from GPL to Amaila Falls Hydro Inc, the private company owned by itself and Sithe Global.

 

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