A healthy debate should begin with a general agreement on the basic facts

Aug 18, 2013 Letters

Dear Editor,
The Amaila falls project has been hotly debated in the press over the last few weeks. This debate however in some cases has been based on information that is factually inaccurate and dangerously misleading. I hold no brief for Sithe Global or the PPP; I am a concerned Guyanese who wants what is best for his country. I do not know whether this Amaila falls project in its current form is good for Guyana or not. In fact, after careful analysis one may very well conclude that this is a bad deal. My concern here is that some of the claims made by a few well-known writers show either a profound lack of the fundamentals of Finance or a reckless disregard for facts. Either way, this kind of fulmination is dangerous for public consumption, and does not serve to advance the public good. Below are a few examples of some of the claims made over the last few days. Following
Claim
“In fact, the taxpaying public is heavily subsidizing the entire Amaila Falls project as constituted and in doing so is subsidizing GPL (M. Maxwell Letters, 16/813)
Fact
The cost of this project is estimated at US$858 million of which GoG is investing US$100 million, this is hardly a subsidy, the rest of the cost to the people of Guyana will be in the form of tariffs based on their consumption or use of energy. Again one can hardly call this a subsidy.
Claim
MONEY IS LOANED AND HAS TO BE REPAID BY THE PEOPLE OF GUYANA EVEN IF THE GOVERNMENT TRIES TO SAY IT’S NOT THEIR LOAN. The total to be repaid will approach US$2.2 to US$2.4 billion quoted by Ram and Gaskin. (James Smith letter 16/8/13)
Fact
2.4B represents the cost of electricity to the Guyanese people over a twenty-year period. This is not a loan repayment. This cost would exist in some form or another whether or not there is an Amaila Falls project, there is no such thing as free electricity. GPL currently purchases oil in order to generate electricity, this cost is estimated to be at around 4b over the same period and could vary based on the market price of oil.
Claim
My estimate of the loan repayment for US$850 million is US$85 million per year,
(James Smith Letters 16/8/13)
Fact
The current financing structure was proposed as follows: 500m CDB, (Debt /loan financing), 100M IDB (Debit/Loan financing), Sithe Global 158M (Equity financing) GoG 100M (Equity). The loan repayment under this structure is $US 600M to be repaid by Amaila Falls Hydro Project Inc. a private company owned in part by the GoG 40% and Sithe Global 60%. There is no Loan Guaranty by the GoG.
Claim
The hallmark of a Rip-off/Ponzi scheme- government (people/taxpayers) investing approximately 80 percent of capital but would end up owning 40 percent; (Lincoln Lewis Letters 14/8/13)
Fact
GoG is investing US 100m or roughly 12% of the total capital (100M/858M). The remainder of the total investment was in the form of debt financing, 500M from the CDB, and 100M from the IDB.
Cleary these a very serious concerns and should be subject to public scrutiny however a meaningful discourse must begin with an agreement on the basic facts, unfortunately we seem to have missed the boat on this one.
Newton Mingo

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