Guyana to build two large hydro power plants in coming years

Feb 18, 2022 News

---

…Amaila Falls initiative now pegged at US$700M — Winston Brassington

By Gary Eleazar

Kaieteur News – The Government of Guyana has announced plans to pursue not one but two large hydro power plants in the coming years as part of its transition to a grid that is powered by renewable energy sources.

The disclosure was made on Thursday by Prime Minister, Mark Phillips, who holds the energy portfolio for the government during his address to the International Energy Conference and Expo 2022, which wraps up today at the Marriott International Hotel. The Prime Minister was at the time outlining Guyana’s three-phase approach in its transition towards renewable energy. According to Prime Minister Phillips, from this year government is aiming to use a combination of natural gas, together with the realisation of the Amaila Falls Hydro Electric Project (AFHEP) and a significant expansion of solar power.

He told conference delegates, between 2027 and 2030 the administration would be looking towards the continued replacement of Heavy Fuel Oil (HFO) together with the expansion of wind and solar, to be complemented by the construction of a second AFHEP type hydro project. The third phase, he disclosed would see future expansion being determined by the prevailing market conditions including use of new technology such as hydrogen still in its early developmental stage. According to Prime Minister Phillips, clean energy and energy efficiency continue to play an essential part in Guyana’s energy transformation and his government remains committed to providing affordable, stable and reliable energy to benefit all, while reducing the country’s dependence on importing fossil fuels.

It is with this in mind, he said government is charting a dynamic path for the country’s future, “a future where sustainable energy, like solar PV and hydro power are harnessed to service the energy needs.” The objectives he said are rooted in the administration’s expanded Low Carbon Development Strategy. Government he said will pursue a strategic development of low carbon energy resources like solar, hydro, wind, natural gas and biomass to meet the rapidly rising energy demands, while keeping greenhouse gas emissions low.
According to Prime Minister Phillips, the new energy mix will lead to the installation of some 500 mega-watts (MW) of capacity to meet the expected tripling of demand for electricity by 2025. According to the PM, with the Gas to Shore initiative, which is also expected to complement the installed capacity by some 300MW, will result in substantial cost savings for power generation while reducing electricity cost for consumers.

Addressing AFHEP directly, Winston Brassington, project lead of the gas-to-shore project told delegates at the conference that the two-decades-old initiative is still to bear fruit but “we believe we are very close now to making it a reality.”

According to Brassington, the new iteration of the 165MW project will be coming in cheaper than its 2012 price tag, which the then project developers—the Blackstone Group—walked away from. At the time, the reported price was pegged in excess of US$1B but according to Brassington, this time around, the project is earmarked to cost some US$700M.
The financing for the project, according to Brassington, will be borne by the contractor, China Railway First Group and will include the installation of some 270 kilometres which he said would run from the Amaila Falls to the Sophia Substation.

Included in the new project scope, according to Brassington, is the upgrade of the Amaila Falls Access Road, two substations—one in Linden and another in Georgetown. Insisting that Guyana has not made any other financial commitments to the project, other than to pay for power when it arrives in Georgetown, Brassington said that the Chinese contractor is expected to put in the finances in part from Chinese institutions. Being pursued under a Build Own Operate Transfer (BOOT) model, Brassington related that the contractor will have to establish a Special Purpose Vehicle (SPV) in which the owner—China Railway—will assume all of the debts and equity and that power will be purchased by the Guyana Power and Light Inc. (GPL). “GPL will buy all of the power under a PPA (Power Purchase Agreement,” and the contractor will have to assume the majority of the risks in the project, he said.

According to Brassington, “like any large project there are a lot of risks but most of the risks are being put to the developer.” With this in mind, he told the conference delegates, “Government is not guaranteeing the project.”

Government he said would only be guaranteeing the performance of GPL. Providing some background into the development of the project, Brassington reminded that China Railway had initially secured an Engineering Procure, Construct (EPC) contract for the project since, according to Brassington, it had been found to be the lowest evaluated bidder in 2012. The contractor walked away the following year as a result of the machinations of the political opposition at the time which was vehemently opposed to the project given the cost.
The Chinese contractor remained in play over the course of the years and had even been approved by the Inter-American Development Bank in 2015 but the then coalition government which secured the executive following that year’s election, abandoned the venture.
According to Brassington, although China Railway remained an interested party in pursuing the project, the government on assuming office decided to retender in the interest of transparency.

This, he said, saw a Request for Proposal being advertised by government to which 19 groups responded and ultimately five bids had been submitted—four from Chinese contractors and one a Brazilian. According to Brassington, all of those that had submitted proposals had been given copies of every bit of information and documentation at the government’s disposal.
These include, according to Brassington, all of the feasibility and other studies undertaken in relation to the project such as hydrology surveys and others. Under the BOOT arrangement, Brassington said Guyana would, in 20 years’ time, take over ownership of the project.

He did, during his presentation seek to point out that during the three-and half-year period expected for construction, an independent supervision firm would be hired by the administration to ensure the hydroelectric plant is built to specifications. This is in addition to the recruitment of an Operations and Management consultant. With Guyana taking ownership of the project 20 years after commissioning, Brassington noted that the project’s average price measured over that time period would be about 7.7 cents which is largely going towards the repayment of the US$700M financing. According to Brassington, the project will be funded by China Rail and Chinese institutions, they will own the project, and it will be operated under a concession for 20 years. At end of the 20 years, he said it will be handed over to government at no cost and as such “I think this a great project.”

 

---

---