Amaila Falls

Feb 24, 2022 Editorial

Kaieteur News – The Amaila Falls hydro project is back with a louder bang, it is alive and kicking. If Guyanese were to listen to the Project Head alone, it is better than slice bread. This second presence of the controversial and ill-fated Amaila Falls project, in its new and improved version, is almost as appealing as the Second Coming. This is from a Project Head, who is himself a second coming of sorts.
According to the Project Head, this reincarnated Amaila Falls is all pluses for Guyanese. The Chinese are financing, and under the BOOT (Build, Own, Operate, Transfer) model, Guyana will take ownership of the project’s assets and operations after 20 years. The first warning was just issued (though he may not know it) by the man doing the talking for leaders of the PPP/C Government, such a liable solider is he. Whenever and wherever the Chinese have run with the whole kit and kaboodle of a big dollar project, the host country has always ended up with the short, sharp, and wrong end of the stick. What others thought as sweet and unbeatable financing terms ended up being an albatross around the necks of those saddled with repaying the debts. To those with questions, or needing enlightenment, we point them to countries in Africa and more recently Sri Lanka.
The next thing that should have captured the attention of Guyanese watching developments with this project is the startling news that the GPL is liable when Amaila Falls runs dry (KN February 22). That pearl of wisdom came from the lips of the man selling the project – this pig in a bag – to Guyanese. It was the Project Head, Mr. Winston Brassington himself, who is in charge of papering over the cracks already being exposed with this project. He has his work cut out for him.

GPL, meaning Guyana, is responsible for hydrology risk. Meaning, when the water supply runs short, and the required levels in the reservoir to power the turbines cannot be maintained, GPL must deal with that baby. We don’t know if we are hearing right, but we do know that we have not lost our senses, because something about this is not right. It is taking sovereign risk into a whole new territory and turning it upon its head. That is, what the Chinese have priced into their final project cost, with an eye on a host of different risks, sovereign included, they have turned and handed back to us, by dumping it right into our laps, through the GPL being liable. Instead of sovereign default risk, the Chinese took their hydrology risk and handed it to Guyana. It’s like penalising the Saudis for not finding oil.
Putt differently, the Chinese factored this into their total pricing equation, then dropped hydrology risk(s) on us. Exxon is suspected of doing this with inflated bills; the Chinese now follow suit. They own the project for the first 20 years, so the argument could be made that hydrology/water risks belong solely with them, and for which the appropriate contingency arrangements are theirs. This risk sharing seems on the face of it to be one-sided, since there is no mention of reward sharing in the first decades of the BOOT arrangement. What is touted as cheaper, through the assumption of hydrology risk could be an annual killer for Guyana, given seasonal fluctuations. Rather cleverly, this falls under the trickery of “allocation of force majeure risks” with GPL carrying Guyana’s share. The GPL can’t manage blackout risk, but is now carrying the ball for water risk(s).
The other piece of good news for Guyanese was that after 20 years this country would own the Amaila Falls hydro project. The Chinese are not known for their generosity with such things, which tells us that there is a catch, a few of them. The state of the facility is one, with another being guidance and partnership, both costly, to assist smooth local management of the project. The concern is whether we are getting a project wreck, being sold a pig in a bag, or inheriting wasted assets.