GuySuCo’s Skeldon power assets being sold for US$30m

GuySuCo is to sell its co-generation plant and three Wartsila power units at Skeldon to a state-owned company specially created for the purpose at a price of US$30 million.

The company, Skeldon Energy Incorporated (SEI) will be jointly owned by electricity utility, the Guyana Power and Light (GPL) and government holding company, National Industrial and Commercial Investments Limited (NICIL). Cabinet approved the sale as well as the Power Purchase Agreement (PPA) between GPL and GuySuCo, officials announced at a press conference at the National Communications Network yesterday. SEI will be managed by Finnish company Wartsila (Guyana) Inc.

Head of NICIL Winston Brassington told reporters that Wartsila assumed management of the energy assets yesterday. According to a press statement issued, SEI will be funded with equity financing of US$5M from NICIL and US$4M from GPL and US$21M in debt financing from GPL and local and international financial institutions. Repayment of the financing will be via the sale of power under the two PPAs to GPL and GuySuCo.

Brassington would not disclose yesterday from which institutions, debt financing would be obtained. He said that “in due course” the additional financiers will be revealed while noting that funding from GPL can be refinanced in the future.

In relation to the US$4M in equity financing from GPL, Brassington said that due to the drop in fuel prices, GPL has the available cash flow. It was also disclosed that on the basis that GPL will purchase most of the power from SEI under a PPA and the plant being operated by Wartsila, Wartsila will provide financing for the rehabilitation of the 10MW plant.

Brassington said that Wartsila will spend US$3M to bring the plant as well as the co-generation plant to optimal capacity and meet Wartsila’s standards. Currently, the three-generator Wartsila plant has an installed capacity of 10 megawatts (MW) while the co-generation plant which uses bagasse to generate power has an installed capacity of 30MW. The NICIL head said that in order to harness the optimal capacity, the transformer capacity would need to be enhanced.

According to the statement, GuySuCo will be paid US$30M for the transfer of the assets and SEI will supply power to the sugar company at the same prices that GPL currently pays GuySuCo today. GuySuCo will also sell to SEI the bagasse for the co-generation plant.

Brassington said that expected benefits of the restructuring of the Skeldon energy assets include the enhancement of the generating capacity of the Skeldon Wartsila and bagasse co-generation plants and providing GPL and GuySuCo with a stable and reliable source of power and relieve GuySuCo of the responsibility to manage the power generation. He also said that it would expand the power generating capacity located at Skeldon as part of the Demerara-Berbice Interconnected System power grid by increasing energy supplied to the grid by 50% by the end of 2016 and almost 100% by 2019.

The Skeldon sugar factory has over the years experienced several difficulties in optimizing electricity supplies.

The NICIL chief said that the US$30M of capital resources now available to GuySuCo was another benefit. He downplayed the public perception that GuySuCo was once again receiving special treatment from the government which has been seeking to transfer funds to the cash-strapped, state-owned sugar company in the absence of the National Assembly.

“We need to look at this as a win-win situation. Indeed, on the one hand GuySuCo is getting monies but looking at it from the power perspective and I believe this is the perspective that is very important for GPL, this move is strategic, it is vital to ensure that our power capacity in Berbice is rehabilitated and expanded and Wartsila had been studying the operations for two years,” Brassington declared.

He said that GuySuCo would benefit and Wartsila’s expertise would address the risks while securing stable power generation over the medium term.

He highlighted that should the transmission line go down between Demerara and Berbice, currently only Skeldon has the generating capacity to provide power. He acknowledged that bagasse availability is seasonal but said that the enhancing of the three Wartsila generators would alleviate the pressure on the co-generation plant.

Chief Executive Officer of GuySuCo Raj Singh said that the company is expecting over 275,000 tonnes of bagasse to be produced at Skeldon in 2015. He added that the other sugar estates could send bagasse to Skeldon to operate the plant.

When questioned by Stabroek News as to how GuySuCo plans on sourcing the necessary amount of bagasse, Singh stated that currently, canes on the ground at Skeldon amount to over 650,000 tonnes. He added that private cane farmers are continuously being engaged as it relates to cane production.

The Upper Corentyne Chamber of Commerce and Industry (UCCCI) was perturbed at GuySuCo after private cane farmers expressed frustration last year prior to the commencement of the second crop and asked for drastic reforms. The UCCCI said that there is land for expansion but private cane farming is not seen as feasible because of the problems preventing the Skeldon factory from grinding anywhere near the promised 350 tonnes of cane per hour.

Singh yesterday did not respond to questions on whether the creation of a special interest company to purchase the Skeldon energy assets was an informal bailout of GuySuCo. Reporters were told that another press conference would be held to discuss the breakdown of the US$30M. Singh did note that the money would be going to pay debts and creditors.

The statement, meantime, said that SEI expects the Wartsila plant to be generating at the full 10MW capacity by next year and the co-generation bagasse plants at full 30MW capacity over the medium term.