Amaila hydropower plant may face delays in financing – developer

The developer of the Amaila Falls Hydroelectric Plant (AFHEP) yesterday admitted that there may be delays in securing financing for the project.
The announcement was made by Senior Vice President of Sithe Global LLC Rafael Herz during a media briefing at the Pegasus Hotel, where he also said that the plant would generate an additional 11 megawatts (MW) of power, increasing the total capacity to 165 MW at possibly no significant increase in construction cost.

Currently, Sithe Global is still in the process of finalizing funding for the project and Herz admitted that this is a complex undertaking: “We are currently foreseeing potentially also some delays in ultimately obtaining the financing because it takes [some] time and things have to come together.” He, however, noted that the release of the Environmental and Social Impact Assessment (ESIA) is an important part in advancing the process.

While officially releasing the updated ESIA for the AFHEP, Herz announced that the hydropower plant will now be a 165 MW facility, up from the 154 MW plant originally proposed to be constructed at the Amaila and Kuribrong rivers. He later explained that “the difference in the installed capacity is really just a result of design specifications, so we’re still looking at a price tag of roughly anywhere between US$650 million and US$700 million.” He said, however, that the price range can increase or decrease based on several factors, including the exchange rate, material costs, and finance and development costs.

According to Herz, Sithe Global will be contributing equity of approximately 30 per cent of the project cost. He said the company and the government have been in discussions about contributing to this equity. He said though that at present the company is set to contribute at least US$150 million in equity in the AFHEP.  Government has already contributed US$15.4 million to build the access road, which President Bharrat Jagdeo said is Guyana’s equity in the AFHEP.

Herz said that apart from Sithe Global and the Guyana government, at present the other likely financiers are the China Development Bank (CDB) and the Inter-American Development Bank (IDB). He said both parties are interested in the project because they see the merit of it. He added too that the CDB would be further interested because of the likelihood that a Chinese contractor-China Railway First Group Co Ltd- would build the plant. This firm, Herz said, was selected first through a competitive bidding process and later through direct dealings. The discussions are continuing, Herz said, while noting that some officials from the China Railway First Group Co. are currently in Guyana conducting assessments.

Rafael Herz

Sithe Global LLC is the developer for the controversial Bujagali hydropower project being built in Uganda, which as been plagued with issues over rising project costs. This plant, which is still to be completed, is said to be among the most expensive in the world. Questioned as to what would be done to ensure that the AFEHP is not plagued with the same cost issues, Herz said the AFHEP is a less complex project. “The Bujagali project in Uganda is a project we are very proud of. And yes, it has had some cost challenges but very normal cost challenges. It’s actually a project that from a technical complexity is more complex than the AFHEP…,” Herz said. He further stated that the cost increases had to do with some geo-technical challenges, while adding that neither the company nor the Ugandan government or the other partners involved in the process saw the increases to be unreasonable.

Asked why the projected price for the AFHEP was so high given that bigger facilities have been constructed for less, Herz stated that the price is not more expensive than other projects. “This project is by no means much costlier than other projects, if you take into consideration that this project incorporates not only the hydropower facility itself but the transmission line and the access road,” he said. He said the hydropower facility is estimated to cost around US$315 million, which would breakdown to a competitive rate of about US$1,900 per kilowatt, while the 270 km transmission line would cost roughly about US$125 million, which translates to US$460,000 per kilometre.

Meanwhile, Herz said that Sithe Global remains committed to initiating this project before the end of the year. “No we are not revising the timeline.  I think we are, at this point, confident that this project will initiate construction in late 2011, that’s what we are working towards,” Herz stated. He, however, pointed to variables that can impact on the timeline.

When the project gets underway, several jobs will be created for Guyanese, Herz said. According to him there will be jobs for both skilled and semi-skilled individuals and priority will be given to the Guyanese workforce.  He noted that there may be some specific needs that would not be available here and the contractor would be free to bring this required labor from China or elsewhere.  He said that project should be completed in less than four years.

Upon completion, power will be sold to the Guyana Power and Light (GPL) for twenty years after which the facility will be handed over to the government. At present, Sithe Global is in discussion with the GPL over the power purchase agreement, Herz said.  He said that this “straightforward” PPA would be finalized within a few weeks.

Meanwhile, the ESIA released yesterday was described as “a living document,” since it will now be subject to wide-ranging consultation. Herz said the consultation process will involve public meetings in Linden and Georgetown, while persons will be able to make contributions online or over the telephone. He said though that teams will be sent to the fields to meet with the Amerindian communities and various non-governmental organizations (NGOs).  The ESIA will subsequently be revised to include the results of the second season sampling effort which is currently being undertaken and any results of the consultation process, Herz disclosed.
The ESIA has been prepared by Exponent Inc, an internal environment and social consulting firm.

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