Prime Minister Sam Hinds yesterday said that there was nothing sinister behind Synergy boss Fip Motilall’s decision to transfer his licence to develop the Amaila hydropower plant to Sithe Global, saying that this is a common international practice in the construction of large projects.
Hinds, when contacted last evening, told Stabroek News that as far as he is aware, Sithe Global has not yet made any payment to Synergy Holdings, since the licence was transferred. The government, meanwhile, also emphasised that that the transfer did not occur as a result of a sale—as was reported by this newspaper—explaining that Hinds, who has responsibility for the electricity sector, authorised the transfer of the interim licence from Synergy Holdings to Sithe Global. “No compensation was paid for the transfer of the licence between Synergy Holdings Inc. and Sithe Global. Synergy Holdings Inc’s development efforts and costs will only be compensated by Sithe Global if the project achieves Financial Close through a financial arrangement between Synergy Holdings Inc and Sithe Global,” it said in a statement last evening, while adding that it was unfortunate that “a few critics’ of the project seemed bent on misleading the public.
Sithe’s Senior Vice President Jim McGowan disclosed on Wednesday that his company had acquired 100 percent interest of the project from Synergy Holdings. He indicated that under the agreement of transfer, Synergy would receive financial compensation upon successful completion of the project.
Before Wednesday, there had been no public announcement by the government or Motilall on this agreement, which would have required the consent of the President according to the law.
According to Section 25(1) of the Hydro-electric Power Act 56:03 “A licensee shall not be capable of assigning or transferring his license or of parting with the possession of any part of the licensed area without the consent of the President.”
In addition to identifying Hinds as the person who authorised the transfer, government yesterday said that the transfer of rights was published on the website of the Office of the Prime Minister and was publicly available to the media and all interested persons since 2009. It said it had stated that Sithe Global had taken over the development for many years and that this had been a matter of public record.
According to government, in 2007 Synergy Holdings identified Sithe Global as the proposed investor for the project and collaborated with the company to fulfil the conditions set out in the interim licence. In 2009, it added, Sithe Global represented to government that it intended to undertake the development of the project and fully accept Synergy’s obligations under the interim licence and enter into a transfer of licence, to which the government consented.
Meanwhile, Hinds, in a letter defending the deal, said that Motilall has expended over US$5 million in cash and unpaid time since 1997 in helping to develop the Amaila Falls Project. “It is quite standard practice that a pioneer having developed a project to a certain point finds a bigger, stronger partner to take the project forward,” Hinds said. According to him, “the pioneer is rewarded in part or in whole with a cash payment at the time and some equity interest in the realized project.”
“Depending upon the profitability of the project the pioneer would receive multiple of his investment in cash and time. Of course the many more times when the project dies before realisation, the pioneer receives nothing,” Hinds said.
Synergy Holdings is currently constructing the access road to the proposed site for the hydropower plant, after having won the US$15.4 million contract last year. Questions were raised about the Motilall’s experience in road building, but both the government and Motilall have said that the company has built roads in the US states of Georgia and Florida. Synergy Holdings is, however, behind schedule on the Amaila Falls road project.
Hinds said that Motilall began considering and pursuing the Amaila Falls development in 1997, after which he applied for and was granted a Memorandum of Understanding (MOU) in early 1998. Based on this MOU, Motilall had Kleinschmidt & Associates of Portland, Maine, make a desktop pre-feasibility study, Hinds said. “With a favourable outcome, Mr. Motilall continued working, seeking partners at that stage and had HARZA Engineering (now MWH) prepare a feasibility study, partly for cash payment and partly for a carried interest,” he stated.
The Prime Minister said that it was on the basis of the positive outcome of the feasibility study that Motilall applied for a licence, which he was granted in 2002. Work then continued with the production of the EIA, Hinds added. “Financial and all closure was close at hand with Scudder Latin America Fund and Leucadia about to take the lead, but among other things oil price was low, less than US$30/barrel; financing costs were high for this then purely privately financed project; the projected cost for electricity was greater than electricity from HFO fuelled stations, and the outward repayment cash flows were greater than fuel purchase flows,” Hinds said “That arrangement fell apart,” he added.
“Mr. Motilall and his partners in Synergy continued working to refine the project, seeking and meeting other partners,” Hinds said. According to him, the government was satisfied with their periodic reports and from time to time judged that “it was reasonable to extend the Interim Licence.” He said that eventually, Synergy won the interest and attention of Sithe Global.
“In time, as Sithe Global worked its way into the role of leading partner to take the Amaila Falls Hydropower project to construction and operation, on the request of Synergy and on the Government’s own consideration and demand, a new Interim Licence was issued in the name of Sithe Global in October 2009.” Hinds told Stabroek News that Sithe Global has been in Guyana since 2007.
Hinds also accused this newspaper and the Kaieteur News of choosing to make innuendos regarding “some sort of corruption” with the Amaila Falls hydropower. Referring to the headlines of the lead stories in yesterday’s editions of both newspapers, Hinds said that they “they do our people and our country great harm.”