Dear Editor,
I thank Stabroek News for sending my recent letter to Synergy Holdings principal, Mr Motilall, for his response (‘Synergy, the company’s partners and the lenders will be spending US$500-600M on the Amaila Falls hydro project, not the government,’ April 8). However, Mr Motilall’s reply continues to raise questions about Synergy’s involvement in this massive project. Mr Motiall rebuts with a number of statements, which I will address below in point form.

1. Mr Motilall states that the cost of power from Amaila to GPL will drop immediately by more than 50%. Nothing is mentioned of the eventual cost of power from GPL to the Guyanese public. He claims that for the 80+ years after the 20-year handover, Guyanese will enjoy a generation cost of US$0.025/KWH (¼ of 1 cent/KWH). I say to Mr Motilall: prove it! Publicly release the document or feasibility study that supports this number and let us have a proper debate on this aspect of the project.

2. Mr Motilall states that MWH (formerly Hazra Engineering Group) are engineers on this project. MWH is a renowned project engineering group. But MWH’s retention starkly highlights a fundamental fact about Synergy’s involvement in this project: Synergy is a middleman and nothing more and it has no expertise or experience in this field. Middlemen in these massive projects usually bring expertise and some financial clout to the table but Synergy brings neither but it will collect a lucrative premium.

3. If Synergy intends to retain MWH why didn’t the Government of Guyana directly retain MWH and not pay an overhead to a middleman in Synergy. At least the middlemen in the Berbice Bridge project were a consortium of local companies and not a foreign unknown like Synergy, and the government could have granted a licence to a local company or consortium subject to local laws with deeper financial pockets than a foreign company with a questionable financial and expertise foundation for this massive project.

4. Synergy is making no serious investment of its own money in this project. It claims it has spent US1M to date. Sithe Global will be putting up 25 or 30% of the capital with the rest (70 to 75%) coming from multilateral institutions like the IDB. Synergy’s only leverage is that it owns the licence for the project. It is not a major investor in this project. Again, by comparison the consortium of local firms involved in the Berbice Bridge project invested significantly more of their own (or in some cases public) money in that project. The Amaila hydroelectric project dwarfs the Berbice Bridge project yet shockingly the licensee in the Amaila project has a significantly smaller investment compared to the licensee in the Berbice Bridge project.

5. Mr Motilall states that the Amaila project is a private development. The truth is that this project is more public than private. While it bears the appearance of a private deal the reality is that it is going to be a public deal and development. The people of Guyana are paying for the roads, transmission lines and power exchanges to move the power from the source to homes. Mr Motilall himself acknowledges a shelf life of at least 100 years for this project of which only a mere 20 years amounts to a private development. After 20 years the people of Guyana will pay for this project. By that time, the private investors and the middleman will have recouped their investment or collected their premium. It is common knowledge that the first 20 years will be the most lucrative return period for the project. What happens after 20 years is that the people of Guyana assume any remaining debt and the increased maintenance and environmental costs. There is no incentive for Synergy and Sithe Global to invest heavily in capital maintenance and replacement within the first 20 years. By transfer time the infrastructure could very well be severely downgraded, operating costs have risen and maintenance and replacement costs prohibitive to the transferee.

6. There is no indication that the debt must be repaid within 20 years. Synergy’s licence expires after 20 years. Depending on the structure of the loans from multilateral institutions, there is a possibility that the Guyanese people will be left with a debt owing to these lenders after 20 years along with an aging infrastructure and plant. What Synergy and the Government of Guyana must disclose are the following: (1) the terms of any agreements with multilateral institutions (2) whether the Guyana government is collateralized in any way to this project in the event of default (3) whether there are any guarantees that these loans must be repaid by Synergy and its partners before the people of Guyana assume control of this project in 20 years.

7. With all due respect, developing US$50 million real estate developments in 8 years is no qualification to develop a US$500 to US$600M project over 4 years with massive financial and environmental implications. The scale shifts from US$6.25M per year to US$125 to US$150M per year. Plus, this is not real estate. This is hydroelectric power generation.

8. Mr Motilall states that “Synergy Energy Solutions did not replace Synergy Holdings but rather it is a sister company set up in 2008 to do solar and wind projects in USA based on the increased awareness of green energy in USA.” Mr Motilall should inform the people of Guyana of the number of solar and wind projects that Synergy Energy Solutions have participated in or completed in the USA or anywhere in the world.

9. Could Synergy tell the Guyanese public of the projected expansion of the project to an eventual 1060MW and whether the existing funding mechanism considers such expansion? Using the current estimate of US$367M for a 154 megawatt project, an expansion to 1060MW is a US$2.5 billion project managed by a company with no hydroelectric generation or plant construction experience or expertise.

The bottom line here is Synergy and Mr Motilall lack the experience, expertise, skill, background, results and training to build or supervise a project of this nature and magnitude and the evidence has not changed in this regard.

Yours faithfully,
Michael Maxwell