Dear Editor,
During the recent debate on our (PPP/C’s) much amended motion, GPL and Guyana’s long term energy strategy, Minister of Public Infrastructure David Patterson, in informing the House and the nation about ending the Wartsila contract, stated that the operations and maintenance of the generating sets were done by 194 skilled Guyanese, and Wartsila received US$25000.00 per day for just “checking off” the work done. From subsequent contacts with the former Chairman and CEO of GPL, we can now state that the Wartsila contract was for about US$7.5 million per year (about US$20, 500 per day). It 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%. The Chairman and CEO’s estimate of the surplus on the contract beyond those direct labour and material costs was about US$0.5million per year or about 16% of the contract.
They believe that GPL received great value for that surplus, benefiting 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 which is unlikely to be there when the local company stands alone.
We are concerned about the Minister misguiding our nation. The majority of citizens not knowing much of these things took him at his word. 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.
Wind farm project
In the matter of the wind farm at Hope Beach, the Minister was similarly misguided. It is true that the PPP/C was ready to enter a contract to pay the US18 cents per kWh but that was GPL’s avoidable cost of generation at crude oil prices then greater than US $100/bbl; and it enabled a much reduced BOOT (Build, Own, Operate, Transfer) (handover period) of just 5 years.
In our calculations the very attractive financing then said to be on offer from the equipment manufacturer and a reasonable rate of return on the small portion of financing provided by the local investor equity, would have been amortised in 5 years at US18cents/kWh. Essentially GPL was foregoing any benefits (lower generating charges) during the five years so as to get a rapid write-down and a quick transfer period (to GPL ownership) of five years.
We believe that similar calculations today at this period of low oil prices (US $50/bbl) should yield an avoidable cost figure even less than US $12cents/kWh and will there be a BOOT period of no more than five years? There is a danger in presenting for comparison the two rates of US18cents and 12cents per kWh without stating the prevailing oil prices at each period and the BOOT period. The Minister may find himself agreeing to contracts which would see the customers of GPL paying more than we ought to and for a longer period, with the investor enjoying an intended or unintended windfall. We, the PPP/C (and we expect the PUC) will be checking all the way.
AFHP
With Respect to Amaila, the Minister appeared to quote selectively from the Norad/Norconsult report, giving the false impression that it gave the thumbs down to Amaila. Indeed it is quite the opposite. The Minister quoted the lines about the hydrological risk and the need for further review and fine-tuning of the design (in particular the dam). What it says is: “The only realistic path for Guyana towards an emission free electricity sector is by developing its hydropower potential. The fastest way forward is to maintain AFHP as the first major step for substituting its current oil fired generation.”
The report leaves no doubt that whilst AFHP is neither a “silver bullet” nor a “matter of life and death”; it is the realistic way towards a Green Guyana. Nor should the APNU have any qualms about losing face; AFHP was identified by consultants since in the mid-1970s in the PNC/Burnham era. It should not be a difficult job for a good PR person to make AFHP as much an APNU project as a PPP/C one. The Minister would be well advised to have a serious engagement with Mr Maurice Veecock and Mr Joe Holder, separately and together, to discuss with him the merits and demerits of the Potaro and Mazaruni River basins.
PV systems
Because of the desirability, political correctness and at the same time novelty of renewable energy systems there may be intended or unintended misunderstandings. For example, in a recent presentation on a PV (photovoltaic) system it was proclaimed that the investment cost was just about US$1/watt (but this was nearly all for the panels), as compared to about US$5 to $6 for AFHP; few persons may have connected this with another statement that the average daily insolation period in Guyana (equivalent hours of full sunlight) is 4 to 5 hours per day. Thus, if one wants the same 24hrs x7 days’ generation of say the AFHP he would need an installation of additional PV panels, storage and inverters which could raise the realised capital (first) cost investment of an equivalent stand-alone similarly-reliable PV system to about US$12/watt. The PPP/C fears that the seemingly uncritical advice which the Minister seems to be receiving may set the stage for intended or unintended misunderstandings at significant cost and disappointment to our nation.
Essequibo Coast
The Minister spoke about “not a light bulb in the Essequibo coast being lit by the AFHP”. This is true, but at the same time it is not the whole story and hence is misleading. The PPP/C administration was aware of the need to settle a number of issues on the way to integrating Essequibo with the Demerara Berbice grid and receiving hydro-electricity. These issues included the conversion of the area to 60 cycles and the routing of the 69kV link (crossing the Essequibo River). In fact, in 2014 GPL completed an integration plan for the Essequibo Coast costing US$33M. The Essequibo coast would have been integrated into the national grid in good time.
Loss reduction
GPL reduced losses from 45% in 2002 to below 29% by the end of 2014. Concerning the current PUUP (Power Utility Upgrade Programme) with a target of reducing electricity losses to 7% (5% technical and 2% commercial) in areas of earlier interventions we found that there were some Guyanese who set out to beat any ‘unbeatable’ metering system installed and they were successful. We found that identifying various areas for commendation and others for shaming by the semi-annual publication of the losses by geographical areas across the GPL network was very effective (commercial losses indicated as low as 3% in a few areas and as much as 40% in other areas), but the new administration has discontinued that approach. How serious are they in reducing losses?
Finally we are concerned about the Minister’s attitude to taking responsibility for GPL. On Sunday 12th February, much of Georgetown and the East Bank of Demerara and likely the entire Demerara Berbice Interconnected System suffered a power outage from about 8 pm to 10.30pm and other areas from about 10pm to the next morning. Today, (Monday 13th February), as I write this (Church Street), I again suffered an outage from about 2pm to 3pm. I thought again of this presentation of the Minister which did nothing to ease my concerns, concerns we felt obliged to share with our fellow customers of GPL, all of us citizens of Guyana wanting to develop our country.
It is true as the Minister said, he did not receive in GPL “a silver plated company,” and he did not receive a company with the extent of redundancy that would be expected in an electric utility in a developed, rich country. But the Minister should have been comforted with the fact that he received a tremendously improved company, with dependable generation increased from 30MW to about 130MW; with power extended to about 170,000 customers from about 75 000 in 1992 whilst increasing the time the typical customer received electricity, from about 50% to more than 95%. We left GPL like much in Guyana, a great work in progress.
In 1992 the PPP/C met a proposal to take the first step in advancing from the elementary long direct feeder line approach to installing three substations in the network. In 1992 we considered the installation of new generators and the extensions of electricity to be the priorities. We were eventually able to arrange the financing for the Transmission and Distributor upgrade programme. Thus the GPL the Minister received, among other things, had recently completed the installations of nine substations with twenty-seven new distribution feeders, a new control centre with modern control capability with the need recognized, and arrangements initiated from additional substations.
Vreed-en-Hoop
The Minister spoke disparagingly about the siting of the Vreed-en-Hoop station, in a swamp. He should be advised that many books speak about Georgetown and the developed Guyana coastlands being in an intertidal swamp, kept dry by the seawalls and kokers. He should be advised that the old (now abandoned) Versailles station was flooded by a number of high tides each year. He should have a look at what remains of the first power station at Kingston and be advised that to facilitate the delivery of fuel and to provide water for cooling, many power stations are placed on the banks of rivers. The Vreed-en-Hoop location is a very natural and logical location. We of the PPP/C are ready to admit that as we Guyanese progress we find ourselves more and more in learning situations at the forefront of local experience and practice. There were a number of things learnt as we proceeded with the Vreed-en-Hoop power station. With respect to the contract for the fuel pipeline, subsequent to awarding the contract, we increased the pipe size (to reduce fuel discharge time) and laid it on piles rather than on the river dam and this incurred a worthy increase in cost. GPL had discussed the drawings with all the relevant parties but as the job progressed MARAD recognized that the ship unloading fuel would be in a channel and called for changes to take the discharging ship out of the channel, creating the need for dredging and maintaining a discharging basin. Nearly every dock along the Demerara River requires periodic dredging.
In his speech the Minister seemed to be bemoaning the fact that only recently the dock had been put in use (GPL has been trucking fuel across the Demerara Harbour Bridge until lately). The Minister should be aware that he has been in the seat for some eighteen months now. Many of the things he bemoaned are now his responsibility, his challenge. He may be condemning himself.
After giving this comprehensive response to the many misguided statements and misinformation provided by the Minister of Public Infrastructure particularly on the Wartsila contract and the AFHP appraisal when the motion on GPL was debated, it is expected that he publicly correct these misleading statements or we will seek to take him to the Committee of Privileges.
Yours faithfully,
Bishop Juan Edghill, MP
