Amaila Falls Hydropower Project is unlikely to become reality any time soon

Dear Editor,

In April 2012, Prime Minister Hinds pronounced that hydroelectricity will be available on the national grid in 2016. In an SN letter of June 17, Messrs Kubeck and Wrobel of Sithe Global stated that financial closure for the Amaila Falls Hydropower Project, which was to have taken place by July 2012 has now slipped by some 8 months (‘Hopeful that Amaila Falls Hydro project will start final due diligence, documentation in July’). An earlier statement by Sithe Global had given a project starting date in early 2011.

In the absence of financial closure any time soon and with borrowing and construction costs escalating by the day, it is difficult to envisage the people of Guyana acquiescing to partnering with Sithe Global on an open-ended project to provide them with electricity at a cost per kWh which is still fuzzy and yet to be resolved.

The viability of this project was never determined since no economic, technical and financial feasibility study was ever carried out. Further, the cost of the project has not been finalized and therefore the cost of electricity to the ratepayer cannot be set and hence it was disingenuous for Sithe Global to state that the project will provide GPL and its ratepayers with the lowest cost option as well as reduce GPL’s average generation costs.

The access road for the project now under construction is unlikely to be completed and operational before the end of 2013. A loan (the Government of Guyana will have the ultimate legal responsibility for repayment of the obligation, if approved) has been sought from the Inter-American Development Bank (IDB) to bridge a financial gap of about US$200M for the project. It is unlikely that the IDB will approve the requested sum because of GPL’s (the executing agency) poor management capability in relation to its technical and financial resources, as well as the country’s already large debt exposure, factors which will determine the country’s creditworthiness with respect to this project. There is also in question the government’s contribution for the project which at this juncture will require parliamentary approval for any committed equity, which the ruling majority has indicated its unwillingness to approve unless certain stated objectives are satisfied.

There is no doubt that hydroelectricity will be good for developing Guyana’s natural resources and for the expansion and diversification of its primary production, but not at any cost, since the electricity produced must be low cost and so far Sithe Global has not stated what this cost is likely to be, except that it would be clean, reliable and affordable.

It is reasonable to conclude therefore that given the financial and other imponderables, the Amaila Falls Hydropower Project is unlikely to become reality any time soon despite the rhetoric, and GPL should start getting its act together to provide a reliable and efficient service with existing and upgraded facilities.

Yours faithfully,
Charles Sohan