Dear Editor,
During a speech at the University of Guyana by President Jagdeo, SN reported on June 21 that he declared that final studies for the Amaila Falls hydropower project on the Kuribrong River, a tributary of the Potaro River, should be completed in August this year the results of which will determine whether the chosen investor, Synergy Holdings Inc will go ahead to develop the venture. The Chairman of Guyana Power and Light Inc, Mr Winston Brassington in an earlier release stated that construction on the hydropower plant will commence later this year.
On September 23, 2005 the President stated that, “within five years hydropower in Guyana will flow from one of the five [hydropower] sites under consideration.” Almost four years later and project studies are still being conducted, its cost is indeterminate and with an uncertain financial future, adequate funding for project execution may not be forthcoming.
An English investor, Mr Cobbs, who was in charge of the British Guiana stand at the British Empire Exhibition in 1924 in London and who was to act as the British Guiana Delegate to the First World Power Conference in Tokyo, approached the then Colonial Secretary, Mr Lobb for the grant of a Water Power Concession in British Guiana – his work on behalf of the then colony seems to have imbued with his desire to become yet another exploiter. The initial overture made by Mr Cobbs was met with a solid rebuff, and in a letter to the colonial government he attempted to portray that there was a dire need to develop commercial electrical power, not only for the emerging bauxite companies at the time, but for a growing consumer demand. The fact that no such project was established was due not only to the difficulty experienced by Mr Cobbs in raising sufficient funds for a hydroelectric power plant, but to the intransigence of the colonial government regarding the task of drawing up regulations governing the granting of water-power concessions. The seeming problems relating to hydropower development in Guyana nearly a century ago are still so evident today.
Guyana is fortunate to have many attractive possibilities for hydropower development, but the sites are located in the generally inaccessible interior of the country, and for a project consisting of storage dam, power plant, transmission lines, switchyard facilities and substations, the development costs per KW delivered to coastal areas become prohibitively expensive. The major problem therefore with hydropower in Guyana is to develop affordable electricity and to obtain adequate financing to do so. Presently this appears elusive and is likely to be so for many years to come for several reasons, despite the rhetoric being propounded to the contrary.
Funding for a hydropower project of the size contemplated is likely to cost over US$500M and the resources will have to come from three possible sources:
Firstly, possible loans from the region’s multilateral development banks, which at this time are unwilling to make large investments available to low-income countries such as Guyana that have limited borrowing capacity. Also, because of environmental, social and economic concerns, the World Bank has been reluctant to provide funding for hydropower projects in developing countries as is evident from its lending portfolio for this sector in recent years.
Secondly, financing from investors such as Synergy Holdings Inc whose investments have been falling sharply in many developing countries because of the collapse in stock markets and the general deterioration in financing conditions. Hence, come October, Synergy will find it difficult to raise capital for its investment in Guyana’s hydropower development and therefore the Government of Guyana (GoG) will be faced with another Marriott Hotel fiasco. The innovative financial package GoG is contemplating as an alternative to get the hydropower up is likely to be just a ‘pipe dream’ given the dramatic decline in capital flows to developing countries, a trend likely to persist for the foreseeable future.
Thirdly, the dim possibility of funding from global commercial banks, most of which have scaled back their international lending significantly because of the scarce financial resources they have available for lending as a result of the credit crunch.
Given the dismal world financial situation, Guyana is unlikely to obtain adequate external financing for its proposed Amaila Falls hydropower project any time soon. The electricity crisis facing the country will have to be addressed sooner or later with a sense of urgency by upgrading its obsolete generating facilities with conventional diesel generating sets, and the possibility of supplemental wind turbines. These systems could be purchased and installed in a relatively short period of time the financing for which donor agencies will be more amenable to assist cash-strapped Guyana with, rather than a costly hydropower project whose development cost per KW is still to be determined and whose electricity charges could be well beyond the financial reach of coastal Guyanese.
Yours faithfully,
Charles Sohan
