Opposition warns of US$4M scam with company that replaced Wartsila

Feb 16, 2017 News

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…-threatens to drag Patterson before Privileges Committee
The Opposition has again expressed serious misgivings over the decision by the administration to end the management contract of Finnish-owned Wartsila.

Last year, Government decided not to renew the two-decade contract with the Wartsila subsidiary, Demerara Power, signalling its intentions to use another one, Power Producers Distribution Incorporated (PPDI), to manage the almost 20 engines. The engines provide the bulk of power for coastlands.
The administration and its state-owned Guyana Power and Light Inc. (GPL) said that it had been paying too much to manage the engines.
The wisdom of ending the Wartsila contract was the subject of a heated debate in the National Assembly, recently.
According to Juan Edghill, a former Minister within the Ministry of Finance, Government may not have been truthful in its justifications for dropping Wartsila.
Unless Minister of Public Infrastructure, David Patterson, corrects his incorrect statements he recently made in the National Assembly, the Opposition side would be forced to take him to the Committee of Privileges, a Parliamentary body that hears complaints against members of the House.
A statement from the Opposition yesterday also argued that during the recent debate on its “much amended motion” of GPL and Guyana’s Long Term Energy Strategy, Patterson claimed that the operations and maintenance of the generating sets were done by 194 skilled Guyanese, and Wartsila received US$25,000 per day for just “checking off” the work done.

Gross Representation
“We were certain that that was a gross misrepresentation of the Wartsila contract but we wanted assurance. With no books at hand but out of subsequent contacts with the former Chairman (Winston Brassington) and CEO (Bharat Dindyal) of GPL, we can now state that the Wartsila contract was for about US$7.5million per year (about US $20, 500 per day).”

According Edghill, this amount paid the wages and all benefits including training of those 194 skilled Guyanese and purchased all the spares and expert services so as to meet or better the efficiency target, the lube oil consumption target and the availability of the generator sets of no less than 90%.
According to the Member of Parliament (MP), in the estimate of both the former Chairman and the then CEO, Wartsila made about $100M in profits annually from GPL, beyond those direct labour and material costs-— or about 16% of the contract.
Edghill argued that the benefits of Wartsila’s presence were much.
“They (Brassington and Dindyal) believe that GPL received great value for that surplus, benefitting from a number of intangibles – some amount of preferential pricing and delivery of the running and all major overhaul spares; in times of tight money and late payments (crude oil prices above US $100/bbl) Wartsila maintained the contract normally.”
Another important “intangible” is that the company in Guyana, whilst it’s a member of the Wartsila group of companies, is continually in contact with others with a common purpose, common experiences and language, and thus an “esprit de corps” is attained and maintained which is unlikely to be there when the local company stands alone.
“We are concerned. The majority of us citizens not knowing much of these things took the Honourable Minister at his word. We, the PPP/C, are fearful that this could be the first step in a scam to award a contract of say US$4million, with a seeming great saving, to a group who would just “check off” what the 194 skilled Guyanese are doing.
Skill is one thing; team spirit and guidance which continually justifies itself are also essential things. We, the PPP/C, will not just wait and see how this matter evolves, but will be demanding full transparency and opportunities along the way to check on the substitution of the Wartsila contract.”

Less production costs
Earlier this month, both Minister within the Ministry of Public Infrastructure, Annette Ferguson, and Minister Patterson were in the National Assembly talking about Wartsila.

Ferguson, in backing the creation of PPDI, argued that the cost for a megawatt-hours (MWH) of energy produced will be lower than what Wartsila had proposed.
She said also that the cost for spare parts will be significantly lower than what is being sold by Wartsila since the company will be buying the majority of spare parts from the original equipment manufacturer.
”All experienced workers that worked with Wartsila prior to the organisation change, are now on-board with PPDI. This testifies to the quality of services that will be delivered,” Ferguson said.
She also blamed the former administration of negligence at the GPL.
”The APNU+AFC inherited the negligence of the former Administration of the GPL. Maintenance cost for generation including Wartsila were in 2011— $2.02B; 2012— $2.36B; 2013—-$2.13B; 2014—- $2.46B; and in 2015 and 2016, $2.50B and $2.8B, respectively.”
An analysis of the numbers shows that $4.79B was spent on maintenance for power generation in 2015 and 2016 which is equivalent to 4.1 percent more than the preceding two years under the stewardship of the PPP/C, Ferguson explained.
Minister of Public Infrastructure, David Patterson, said that prior to the change of Government, 100 percent of the maintenance was being done by 100 percent Guyanese. Government was paying US$25,000 per day to Wartsila.
”There is nothing wrong and sinister. We are cutting overheads. The cost for services to GPL will be reduced,” Patterson told the House.
According to official records at the registry, the Power Producers and Distribution Inc. (PPDI) was formed in December but has two officials-—one director and one secretary.
The director is Permanent Secretary of the Ministry of Public Infrastructure, Balraj Balram. The Secretary and incorporator is attorney-at-law Ronald Burch-Smith.
On January 1, 2017, PPDI took over the operations of Wartsila that has been here for two decades and which has, overtime, been maintaining almost 20 engines for the state-owned GPL.
The Coalition government, one year after taking power, had admitted to reports in Kaieteur News that it will not renew Wartsila’s maintenance contract.
Months later, the PPDI was established and has absorbed the 194 employees that Wartsila had.

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