Dear Editor,
I refer to several articles in the press recently about the proposed 150 megawatts Amaila hydropower project and would like to comment as follows: Using a figure of US$4000 per kilowatt (presently used for a plant in developing countries) the developer would price the Amaila plant and transmission line at around US$600M to construct.
Using a capital cost recovery period of 25 years the developer for the Project, Sithe Global, or anyone else, would have to pay back to the lenders most likely the Chinese and IDB, approximately US$71.2M per year based on an 11% interest rate. After introducing a capacity factor for annual generation from the 150 MW plant, its energy cost works out to be US9.2cts, ie, G$18.86 per kilowatt-hour. The current rate in Guyana for residential power use presently is around G$26.6 per kilowatt-hour.
To the above you have to add the following costs: developer’s profit, transmission and distribution cost, maintenance of the plant and access roadway. In addition to these costs, if there is any change in site geological conditions necessitating design changes this will result in an enormous cost over-run that would further increase the cost per kilowatt- hour. In other words since the government would be purchasing the power produced for a period of 25 years, the cost to the government may very well be the same as the present rate per kilowatt-hour or probably more.
However, the country would have its own hydroelectric plant at the end of the 25 years. The other factor too is that on account of impending global warming causing a period of less rainfall the developer would pass the cost on to the government since the plant would be generating at lower than anticipated capacity.
The government also has to allow for the present plant in Kingston to be in an operational state at all times during and after construction of the hydro-plant.
At the end of the 25 years the government would also have to refurbish the turbines and generators (4 would be required for the plant) and that would be a separate extra cost to the government.
Even if Mr Motilall can successfully build the roadway in 8 months time it will take another 1-2 years to design the plant before mobilization and construction can commence. By that time the roadway could be washed away. I would like to draw the government’s attention to the roadway built by the previous government for the upper Mazaruni hydropower project in the 1970s. The roadway washed away within a year after construction. Pontoon crossings at the two rivers would not be suitable for transporting heavy equipment and material, and bridges would have to be built by the developer. All these extra charges would be passed on to the government in the energy price.
The President’s statement that hydropower would cost pennies per kilowatt- hour is nothing more than a pipe dream.
If this project does go ahead, which I doubt very much, I would suggest that an experienced hydropower economist review the Terms of the Power Supply Contract before the President agrees to the terms and conditions.
Yours faithfully,
M Alli
