The Finance Minister is not being forthright on the Amaila issue

Aug 23, 2013 Letters

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Dear Editor,
I refer to your article (SN 8-21-2013) captioned, “Finance Minister insists state would not incur debt in Amaila model”; and in this regard, I would like to disagree with the Honorable Finance Minister, Dr. Ashni Singh, who is clouding the issues by not being forthright on the Amaila investment.
The fact that Amaila is a large investment that involves hundreds of millions of taxpayers’ dollars; and the fact that it will encumber for many years to come a significant share of our natural resources and patrimony, information on this project cannot be restricted to a few individuals. Only private companies are allowed by law to keep their business private. Amaila is not a private or a public company owned by stakeholders; it a merger of both private and public stakeholders and as such all information must be placed in the public domain, for tax dollars are used for the public good, while private dollars are circumscribed to private interest; and these two, the public good and private interest, might not be coterminous, but divergent. This complicates Amaila and it must be resolved.
Consequently, the Minster must release to the law making body in Guyana, the duly elected Parliament, the full and complete project appraisal document that will spell out in detail information that includes parameters for ownership, debt and equity; financial and economic rates of return; the management and governance structure; tax liability issues; the environmental analysis, and the social impact assessment, among other concerns. Additionally, since the people of Guyana own shares in Amaila, the people of Guyana must see the legal documents used to register the company. In other words, the complete appraisal and the company registration papers are fundamental to clearing all the information gaps in this project.
If this cannot be done, then the alternative plan for Amaila would be for the government of Guyana to sell its shares and get out of this investment immediately and leave it fully in the hands of the private sector. The reason for this approach is given by the Minister himself who said, “…Amaila … (is) a privately controlled company… (with)… Government taking a minority stake in … (it)”. With a minority stake in Amaila, this means the Government can be out voted by the majority owners and the Guyanese people will be left holding an empty bag. Why would the Government and people of Guyana want to be trapped in such a situation? It makes no sense for the government to be a minority owner in this venture. Consider this example. The Minister states that if GPL defaults, the company (Amaila) “… may trigger a termination of the Power Purchase Agreement …” So if the majority share-holder decides that they are finished with Amaila and they want to close shop they can do so at any time and walk away leaving the minority holder, the Government and people of Guyana, in a serious situation with no recourse. No government should be placed in such as invidious position.
Therefore, I would advise the Government of Guyana through the Minister to sell the Amaila shares and use the US$100.0 million which has so far been set-aside for this investment in other worthwhile projects, including strengthening the government oversight functions in this and other related sectors. Furthermore, once the Amaila shares are sold, this will free taxpayers, the Parliament and the Treasury from placing on the national books a liability of US$758.0 million. Moreover, since there is this view by the government that Amaila is a profitable undertaking, it stands to reason that finding private buyers would not be a difficult undertaking. The government must therefore stand by its word of the profitability of Amaila and test their own theory by placing its Amaila shares up for sale to the private sector. The Guyana and Caribbean stock markets, among others in world financial markets, are useful places for this process to start, once the due diligence examination is completed by the Inter-American Development Bank. As an aside, it is indeed mystifying to say a large investment project is profitable without a due diligence report being available for public scrutiny. This is unheard of in financial markets.
One of the other interesting features of this project is that the total debt seems to be a moving target as it changes without reason. For example, the recent debt permutation given by the Minister is US$650.0 million which is different from the previous total of US$608.0 million (China Development Bank of US$508.0 million plus IADB of US$100.0 million). What is the explanation for this? Publishing the appraisal document and due diligence report will fix this concern.
Finally, The Minister made a series of unsubstantiated claims aimed at advancing the idea that “…taking a minority stake in (Amaila will)… reduce the cost of capital… reduce end-user tariffs… build Guyana’s sovereign credit rating … (attract)… foreign capital… prove Guyana is investment worthy… (and) …the future cost of borrowing for citizens and businesses would go down because capital would become cheaper…” My response to this ‘amalgamation of goodies’ is that the Minister is ‘over reaching’, for if such outcomes are derived from the government taking a minority stake in Amaila, this will be path breaking in the fields of finance, accounting and economics and a Nobel Prize will just a be a hand-shake away.
There are many more outstanding issues that need to be address, but I will leave them for another time, noting that the Government and people of Guyana own all the risk by issuing a guarantee for the entire Amaila debt.
Dr. C. Kenrick Hunte

 

 

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