GPL, Skeldon US$30M power deal ‘a silly arrangement’

Oct 14, 2015 News

---

…we can’t even sell it; no one is going to buy something like that – Holder

 

The previous administration continues to come in for flak over a US$30M transaction it would have entered into to sell off the generation facilities of the Skeldon Sugar Factory. Minister of Agriculture, Noel Holder, is condemning it as a deal that doesn’t make sense. “It was a silly arrangement.”
Minister Holder was at the time responding to queries yesterday by media operatives and he opined that, “conceptually, it makes no sense.”
He said too that the deal has also stymied progress at the factory. He told media operatives that given the current state of affairs, “we can’t even sell Skeldon (Sugar Factory); no one is going to buy something like that where you can’t even run your own factory with your own bagasse, because you sold that part of it to someone.”
Minister Holder said that “what you are asking GuySuCo to do is to put in very cheap bagasse in its fuel for somebody else who will convert it into electricity and then have GuySuCo buy back electricity at very high prices to run its own factory.”
The Minister was making reference to the fact that GuySuCo sold off its generation facilities to Skeldon Energy Inc—a Special Purpose Company jointly owned by the Guyana Power and Light (GPL) and the National Industrial and Commercial Investments Limited NICIL), only to have to buy back power to run the factory.
Tracing the history of the transaction, Minister Holder said that the then People’s Progressive Party Civic (PPP/C) government actually made an attempt to get US$30M into GuySuCo coffers by firstly attempting “to do something through (the Guyana Geology and Mines Commission) GGMC.”
He said when this failed, the government attempted to utilize funds through the Central Housing and Planning Authority (CHPA) but this too failed for legal reasons.
The Minister said that it was only after these attempts failed, that the then government decided to form SEI and enter into the US$30M sale of the equipment, a transaction that the new coalition A Partnership for National Unity, Alliance for Change (APNU+AFC) is looking to reverse.
Asked how this reversal would be effected since GuySuCo would be hard pressed to come up with the cash, Minister Holder told media operatives that government is the sole shareholder of both companies.   “Shareholders should be able to talk to each other.” To date the sugar company has also only been paid US$19M of the agreed US$30M and SEI has since indicated that it could revise the outstanding US$11M amount.
According to Chairman of the Board of Directors of SEI, Lloyd Rose, it is still to be determined how much it will pay off GuySuCo.
Rose said that SEI is currently conducting a technical evaluation of the assets which were purchased, with a view to determining exactly what it is worth and how much remains to be paid.
The official declined to comment further on the finalization of the deal earlier this year. GuySuCo has since had to turn back and purchase electricity from SEI, at a so far unknown cost.
The billing arrangements have been on a month-to-month arrangement and vary each month depending on the energy demands of the sugar company. It was also pointed out that GuySuCo has seasonal demands.
Rose told Kaieteur News that there is a Power Purchase Agreement (PPA) that still has to be finalized between SEI and GuySuCo.
He said while a PPA did form a part of the transaction involving the sale of the assets, it was never finalized.
At present, GuySuCo takes the majority of power supplied by SEI. The remainder is being supplied to the national grid.
As it relates to the electricity being sold by SEI to GPL for the national grid, Rose said that this too is determined by a PPA.
Meanwhile, as it relates to SEI still in the process of determining the true value of the assets it agreed to buy from GuySuCo, Rose told this publication that SEI has already had cause to ink a US$5M contract for the refurbishment of the equipment. He said the company is also gearing to execute another contract for another US$5M for further restorative works on the power generation facilities.
Last April, SEI and Wartsila, a Finnish company that manages power stations across the coastlands, executed two contracts – one for the rehabilitation of the generation assets to restore the equipment to its optimal functionality, and another for the operations and maintenance contract for the entire power plant operations.
SEI has said that since entering into those contracts, Wartsila has commenced its rehabilitation of the generation assets, which is expected to be completed by year-end.

---

---