The government should seek to formulate a new hydropower package

 Dear Editor,

I have been asked by many observers, ‘What is next for Amaila?’

The answer is clear though not simple. Sithe’s decision does not signal the end of the world. The GOG should seek to formulate a new package which is less costly in the medium and long term and would deliver affordable electricity to consumers. They should rebuild the project from scratch using an alternative financing model and secure firmer guarantees on issues like tariffs and construction costs. The US$30mn+ access road to the Amaila Falls is too far gone to stop but the licence to Sithe should be cancelled.

In response to the withdrawal of Sithe Global Inc from Guyana’s Amaila hydroelectric project the GOG has been signalling that it will continue a search to find a financer for the project. That is a good thing as long as they do so in an appropriate manner and have learned the lessons of the recent mess. Since the government presented no complete Amaila Hydro project proposal for the Parliament’s approval it is still open to them to present a more carefuly formulated package in future.

The debate that led us to this juncture, namely the lack of unanimity over the Bill and Motion presented to the Assembly by the PPP Government turned on many issues, some of which warrant special attention.

The issues
The process of consultation when undertaken by the government has been schizophrenic and characterized by irregular, hurriedly-called, frenetic meetings interspersed with extended bouts of abuse and vilification of the very people intended to be part of a consensus.

The government has not, to this date, submitted for the approval of the Assembly, a comprehensive project document for the latter’s consideration or approval, a discourtesy not extended to the IDB Board of Directors, although they both have obligations to approve spending in their respective spheres.

The total cost of the project is too high ‒ the financial costs are excessive and the construction costs seem to be incomplete.

A plan for the development of the relevant river basins (the most promising of which are the Mazaruni, Potaro and Essequibo) is missing.

The tariffs for households are likely to be too high and there is no faith in the assurances given by the government spokesmen in this regard, and that is not only because many seem to be whimsical and simply intended to quell criticism.

GPL and NICIL are part of the problem, both are highly politicized and inefficient. The former is operating in too many areas in almost all of which its management has neither demonstrated competence, training nor experience while the latter entity is grossly inefficient.

The future
In re-examining this package therefore, the government needs to ensure that the proposals have the following features and take proper account of the opposition’s views. The government should:

1. Publish all the MOUs and agreements signed and licences awarded to individuals and entities in relation to hydroelectric and river basin development.

2. Publish the government’s plan for the development of the Potaro-Mazaruni basins, of which Amaila is a part, demonstrating how and if Amaila, Tumatumari, Kaieteur or Turtruba, Tiboko and the Chi Chi diversion fit in or are integrated with this plan in the medium and long term.

3. Urgently establish a specialised entity properly staffed to plan and oversee the development of all major infrastructure in Guyana. The relevance and urgency for the establishment of the Public Procurement Commission should not need to be mentioned again here.

4. Ensure the restriction of the role of NICIL to the activities for which it was originally established and ensure that it is equipped with competent staff and managers.

5. Replace urgently the Board of GPL with a board that has the confidence of the stakeholders and which is not politicized. The first charge of this body would be to plan for the replacement of or radical overhaul of GPL so that it can take on the type of obligations expected of it after 2020. They would also prepare a revised management structure intended to radically improve arrangements for reducing technical and commercial losses by 2015.

6. Include in the financial package for Amaila arrangements to raise capital from the domestic private sector and the Guyana diaspora, for example, investment bonds.

7. Ensure that the World Bank and the European Investment Bank are included among those approached for funding.

8. Include in the package a specific undertaking to reduce the tariff to domestic consumers and to industry in keeping with the planned fall in the cost of power generation.

9. Cancel the licence for Amaila and re-award it via a process which, like that for the construction contract, should be publicized with the announced process being respected. 10. The award of the licence should be transparent and reasonable.

Conclusion

It goes without saying that the government should, in timely manner, lay for the consideration and approval of the National Assembly, a complete proposal for the development of Amaila. If that presentation is informed by proper consultations with the stakeholders, appropriate consultation with the political parties forming the majority in the Assembly and the foregoing elements, there will be the basis on which to strike a consensus.

Yours faithfully,

Carl Greenidge

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