Dear Editor,
I refer to the ex-President’s contract award to Sithe Global to construct the Amaila Hydropower Plant and Transmission Line. The revised cost to construct the plant and transmission line is now estimated to cost US$835 million according to the developer, Sithe Global, and includes interest during construction, guarantees, etc.
Using a capital cost recovery period of 20 years and an interest rate of 8%, the developer for the project, Sithe Global, or anyone else would have to pay back the investors or lenders, most likely the Chinese and the World Bank, approximately US$85 million per year. This is only the annual capital cost repayment and we must add the annual operation and maintenance cost of the 165MW turbines, generators, transmission lines, substations, access roads, etc. This will be at the lowest about US$9 million bringing the total annual cost to US$94 million. After factoring in plant outages and a capacity factor, the cost of energy delivered to Sophia would be 11.06 US cents, ie $27.70 Guyana per kilowatt-hour of electricity produced.
To the above figure of US$94 million per year you have to add the developer’s profit. Also Guyana Light and Power will also tack on their additional cost of distribution and maintenance, etc, to consumers. The current rate in Guyana for residential use is probably around G$26.6 per kilowatt-hour. There would be some annual benefits to Guyana through the Clean Development Mechanism since the hydro plant would be displacing thermal generation.
If there is are any changes in site geology necessitating design changes then there will be a corresponding cost over-run that would further increase the energy cost per kilowatt- hour. In other words since the government will be purchasing the power produced for a period of 20 years, the cost of hydro energy will exceed the present cost the Guyanese people are paying. The government claimed that US $100 million is spent in purchasing fuel annually, but how much of that is actually spent on fuel consumption for the thermal plant in Kingston is unknown.
The other factor too is that on account of impending global warming causing a period of less rainfall the developer would pass on this cost to the government, since the plant would be non-operational and generate less power than anticipated.
The government also has to allow for the present plant in Kingston to be kept in an operational state at all times during and after construction of the Amaila hydro plant.
At the end of the 20 years the government would also have to replace the turbines (4 minimum would be required for the plant) and that would also be a separate extra cost to the government.
The 300 km transmission line also has to be maintained regularly. Helicopters are normally used to assist with this work.
The government is now responsible for constructing the access road that will be very costly since Mr Motilall’s contract was taken from him for non-performance. I doubt whether the government has the expertise to complete the construction of this access road and the complicated cross-drainage works on the hydro site.
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. If the previous government, with all its competent engineers, superintendents, workers and machines could not do so, then, I cannot see the present fly-by-night consultants and contractors in Guyana today building this roadway which would be acceptable to the Chinese contractors. The ex-president may have to come out of retirement, don his hard hat and supervise construction.
Pontoon crossings at the two rivers would also 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.
The final cost to construct this plant is therefore unknown and this could be another Bujagali in the making. The government should publish the terms of the contract the previous administration made with Sithe Global.
The ex-President’s earlier comment that hydropower would cost pennies per kilowatt- hour is therefore nothing more than a pipe-dream and pure imagination devoid of any mathematical and economical computations. The above estimate is closer to the real cost of energy that Guyanese consumers will have to pay for hydro.
Yours faithfully,
M Alli
