Though the target date for start-up of a hydropower facility for the national grid has passed, its actual implementation could be closer now that the potential investor seems likely to receive the US$371 million financing necessary for the project.
Synergy Holdings Inc President Makeshwar Fip Motilall told Stabroek News in a telephone interview from Florida, USA on Thursday that some multinational lending institutions had expressed an interest in financing the 100-megawatt hydropower facility at Amaila Falls, Kuribrong River.
Some 70% to 75% of the financing is expected to come from multinational lending institutions like the European Investment Bank (EIB), the World Bank and the Inter-American Development Bank (IDB). Interest has also been shown by the Caribbean Development Bank (CDB), Motilall said. All the above-named banks have had talks with Synergy on the project and have shown interest, he added. He said the project’s investors could be termed “a consortium of multilaterals.”
This year, the EIB approved a US$130 million loan for a 250 mw hydroelectric facility in Uganda. This project is being undertaken by Bujagali Energy Limited, Aga Khan Group and World Power Holdings, an affiliate of Sithe Global Power Limited Liability Company, a private developer of power plants in the US and in emerging markets, and which is majority owned by the Blackstone Group. They formed Bujagali Energy Limited, a special-purpose company incorporated in Uganda to build and operate the project. Stabroek News understands that Motilall may be in discussions with Sithe Global for 25%-30% equity investment.
The remaining 25%-30% will be an equity arrangement worth some US$100 million.
In May 2006, Motilall had projected the cost of setting up the facility at US$300 million; it has since increased. The Synergy president said the cost of building materials had increased since then and the longer the project takes to begin the more the cost is expected to increase.
One challenge in developing hydropower for our local grid has been the relatively small demand. But information suggests that peak demand has more than doubled over the last 15 years, from about 40 mw to 84 mw. The potential exists for 165 mw from the 100 mw hydropower site. Recent growth in the mining sector will also see increased demand for hydropower, since investors in the bauxite mining industry have plans to invest in alumina production.
Last year, Motilall had given a commitment that construction of the hydro facility would begin on August 1, but it is now set to begin in the first quarter of next year. The project’s completion date has also shifted from 2010 to 2011.
Now that the financing seems likely, the next step would be the preparation of bid documents, which Motilall is in the process of doing. This will be an international bidding process, and local engineers are likely to have subcontractor opportunities. Motilall said Italian and US firms were noted for constructing such facilities, hence the international bid.
In July 2006, when the government signed the Memorandum of Understand-ing (MOU) with Synergy for the 100mw plant, it had placed a cap on the price of power to be provided.
Prime Minister Samuel Hinds had said then that the price for electrical energy to be delivered at Sophia was capped at 7.5 US cents/ KWh under the MOU. He had said that the government and Guyana Power and Light Incorporated “have the right to terminate the MOU before August 1, 2007 if the estimated delivered price comes in higher than the target of 7.5 US cents/kWh.” GPL’s production cost at the time was almost double this.
Motilall said the government and Synergy were still in negotiations in relation to that clause and declined to say whether the company would be able to keep its charges at or below 7.5 US cents.
Environmental permits that the company secured back in 2001 for the project have all been renewed until 2011. Prior to 2001, the company had conducted several surveys of the area and had sought an MOU with the government, but this was not achieved until last year.
The development of the hydropower plant would be undertaken as a 35-year build, own, operate and transfer (BOOT) arrangement under an open-book, public-private-partnership approach.
Earlier this year it was expected that Synergy would have supplied the Guyana Power and Light with a four-unit Wartsila plant from Mexico as an interim arrangement until the hydro facility was completed, but this fell through. The four-unit plant would have replaced 24mw currently supplied from the more expensive diesel generation, since it would have used heavy fuel oil (HFO) which is cheaper.
Motilall said that there was still a plan for interim generation and Synergy would work with GPL to ascertain the best way to proceed on this. In the interim, GPL has repaired generation equipment, which it now uses and has temporarily rented other equipment.
