Synergy will find it extremely difficult to attract investors
In a letter which appeared in SN of April 13 captioned ‘Still more questions than answers,’ writer Mr Maxwell has raised many troubling questions regarding funding for and construction of the hydropower project (AHP) at Amaila Falls on the Kuribrong River. So have Mangru and others concerned writers.
AHP as profiled is expected to cost between US$500-$600 million with the sources for funding being vaguely identified as the Inter-American Develop-ment Bank (IDB) and China Development Bank. With respect to financing, the Government of Guyana (GoG) should clarify its distinction between expectation and the actuality of funding for this project, since its successful completion depends on adequate finance being made available. If Synergy Holdings Inc (SHI) is to design-build this project, the cost and how it will be financed should be stated. Why should GoG proceed to pay for preliminary works for a project whose financing is fuzzy at this juncture and may never materialize under the present administration. If Mr Motilall/SHI fail in their bid to make AHP a reality, GoG has no means legal or otherwise of recouping its initial investment, because of bad decisions and poor judgement by others.
Therefore GoG should be assured that funding for the project has been obtained by the developers before committing its resources, which in any case should be done on a pari passu basis for the preliminary works, if this segment of the project is its contribution to this private development as claimed.
IDB lending is only to members (governments) and if it does lend for a privately financed project in a particular country, its government will have to guarantee the loan.
It seems unlikely if indeed it is willing to commit its funds, that the IDB will make a significant investment of the scale contemplated by the developers towards the cost of this project, given its limited capital base and priority demand for finance from its other members. The other major multilateral development bank, the World Bank (WB), will not consider funding any project of this size unless a feasibility study is undertaken to establish the project’s economic and financial viability.
Also, an environmental assessment for civil works will have to be undertaken with public consultation and comment, and any involuntary relocation will have to conform to World Bank requirements. It is no small wonder therefore that GoG has not attempted to tap WB funding for this project, simply because WB’s loans and procurement requirements will require transparency and adherence to strict guidelines which will be too difficult for it to comply with.
There has been a dramatic decline in capital flows to developing countries, and lending has been sharply curtailed for many worthy projects because of the credit crunch and recent collapse of the stock markets. Hence SHI which appears to be an unknown investor in the world’s capital markets will find it extremely difficult to attract investors, and with an uncertain financial future, adequate funding for project execution may not be forthcoming. GoG has an obligation to thoroughly examine the records of SHI to determine its financial integrity, its technical capability and proven track record to undertake a project of this size. After all, SHI has no experience of hydropower development on the scale contemplated in this ecological region. Despite the rhetoric, this project is highly risk bearing, having regard to the technical unknowns of the region and the uncertainties and impediments to hydropower electricity production in the high rainfall equatorial tropics. Unless these examinations are carried out to satisfy preset guidelines, GoG should not commit funds upfront to construct infrastructure for a project which in a year’s time most likely will be going nowhere for lack of adequate financing and technical knowhow and by which time the forest would have started to reclaim the access roads and power transmission corridor built.
In addition, Guyanese will by then have a new president with his chosen crew onboard whose differing strategies will hopefully carve a new course for future development. At that time all those functionaries who today are making questionable decisions and wasting the country’s scarce resources on a hydropower project poorly planned and being executed with more questions than answers will have abandoned their posts, leaving the Guyanese people stuck with yet another Marriott Hotel type fiasco.