Minister of Finance Dr. Ashni Singh yesterday tabled a Motion to increase the limit on total guarantees that can be issued under the Guarantees of Loans (Public Corporations and Companies) Act from $1 billion to $150 billion or approximately US$730 million as a means of guaranteeing that Guyana Power and Light is able to purchase the power that the Amaila Falls hydroelectric facility will generate.
It is expected that the Motion will be debated shortly in the National Assembly and Government is optimistic that based on the consultations with the Opposition, the Motion will receive unanimous support in the House, a statement from the Ministry of Finance said yesterday.
According to the statement, the guarantee limit was last raised in 1980 from $500 million to $1 billion. “Based on the US Dollar rate in 1980, the guarantee at the time was equivalent to US$400 million. Adjusted for US inflation from 1980 to 2013, the equivalent figure in US dollars today would be approximately US$1.1 billion,” said the statement.
According to the statement, the increase in the guarantee limit follows on the Government’s commitment to the Amaila Falls project and guaranteeing that the Guyana Power and Light honours its financial commitment under the Power Purchase Agreement to be entered into between GPL and Amaila Falls Hydro Inc. “Under the PPA, GPL commits to purchase the power from Amaila for an average annual capacity payment,” said the statement.
“GPL’s obligation is in the form of a Performance Guarantee. The Performance Guarantee is not a guarantee of debt but a guarantee of GPL’s obligations under its PPA to pay for power delivered from the hydro facility,” said the statement.
According to the statement, GPL expects to receive 1,000 gigawatt hours of power and to save approximately US$200 million annually in avoided fuel costs in exchange for paying on average an estimated amount of US$100 million to US$110 million per annum over concession period – 20 years. It said that the project is expected to have a life of approximately 75 years.
“The Government has shared the commercial agreements governing the transaction on a confidential basis with APNU, including the PPA, which details the Government’s obligations. The Government looks forward to continuing discussions with the Opposition on the details surrounding the transaction and expects to have further meetings with the Opposition prior to bringing the proposed motion to a vote,” said the statement.
Government is expected to make financial closure for the US$840 million project sometime around the third quarter this year and this too is contingent on the findings of the Inter-American Development Bank’s (IDB) due diligence, currently on-going and expected to be completed by the end of July this year. The project’s success is also dependent on the completion of the road which has been plagued by setback from the beginning, with a number of changes of contractors for bad work.