IDB hydro loan okay unlikely until June 2016

- jars with Ramotar statement

Despite optimistic pronouncements by government officials, progress on the implementation of the Amaila Falls Hydroelec-tricity Project (AFHP) is likely to take some time with the Board of the Inter-American Development Bank (IDB) expected to approve a loan for the project by June of next year.

In his New Year’s address, President Donald Ramotar said that “within months” the government expects to achieve financial closure and the start of construction of the controversial AFHP. He had announced that Oslo had transferred US$80 million to the IDB as Guyana’s equity in the project. Prior to that, on March 27 last year, Ramotar told a news conference that the AFHP was being examined by the IDB board and they would hopefully be wrapping up soon. “As far as I know [the project] is back with the IDB Board and hopefully [the] IDB Board will be concluding on that in the not too distant future,” the president had said. He was hopeful that the proposed developers, Sithe Global, who withdrew in 2013, would be back on board.

However, based on documents seen by Stabroek News, both the IDB and the Norwegian Agency for Development Cooperation (NORAD) “estimate in good faith” that the IDB Board will approve a loan for the project by June next year.

In December, NORAD transferred US$76.4 million to the IDB with US$3.6 million expected to be transferred by the end of last month as Guyana’s equity in the AFHP. NORAD and the IDB have been discussing Guyana’s participation as a shareholder in Amaila Falls Hydro Inc and the US$80 million contribution represents payment for verified emission reductions for the forest years 2012 and 2013 under the Guyana-Norway forest protection partnership. Guyana and Norway have a five-year pact under which Oslo will pay up to US$250 million based on Guyana’s efforts in protecting its forest and meeting enabling indicators.

According to the letter agreement pertaining to the transfer from NORAD to the IDB, the IDB Board is also expected to consider in connection with the AFHP, a loan from the Bank to provide financing for the project.

The document states that the IDB and NORAD estimate in good faith that the IDB Board will approve the loan and the grant for the equity on or before the date that is eighteen months after the transfer date which is the day the last contribution is transferred which has to be no later than January 31, 2015.

However, if the IDB has not approved the loan and the grant on or before the 18 months are up, and unless the Bank and NORAD agree to extend the time, the IDB will have to return the contribution and if applicable, any investment income to NORAD.

If the loan and grant are approved, the IDB and NORAD shall negotiate in good faith to conclude       an Administration Agree-ment.

The letter agreement emphasizes that both parties agree that it is important to undertake appropriate measures to prevent irregularities, fraud, corruption or any other illegal activity in the management of the contribution. “The Bank will take timely and appropriate action to respond to allegation of any such practices in connection with the project and in accordance with its applicable policies and procedures on fraud, corruption and prohibited practices.

The bank shall immediately inform NORAD, on a confidential basis of any findings of fraud, corruption or other prohibited practices relating to or affecting the contribution,” the agreement states.

It says that in the event that part of the funds from the contribution is found to be misused or not satisfactorily accounted for, such funds shall be returned promptly to NORAD should this be due to the action, and/or gross negligence, and/or willful misconduct of the Bank or any person employed or hired by the Bank.

It also states that Norway reserves the right to review the use of the contribution. Norway and the Bank shall discuss in good faith the nature, scope and conduct of such review or evaluation, and the Bank shall provide to Norway such information as Norway shall reasonably request within the limits of its confidentiality agreements, policies and procedures, the agreement states.

Before US-based Sithe Global pulled out here in August 2013 as the developer of the US$858.2 million, 165 megawatt hydro venture, the AFHP was shrouded in controversy as costs escalated.

Since the project was first announced, costs of the 165-megawatt hydro venture have escalated from the original US$450 million to US$858.2 million up to 2013. Recently, it was also revealed that the costs for the access road had ballooned from US$15 million when the contract was signed in 2010 to US$41 million last year.

Sithe Global pulled out of the AFHP in August 2013 citing a lack of political consensus. The company had issued explicit statements that unless all three parties in Parliament backed two measures for the controversial US$858 million project it would pull out. The measures were not fully supported and the company walked away.

The IDB had been expected to partially fund the AFHP and at the time of Sithe Global’s pullout, the Bank was conducting due diligence but that was halted before it was completed due to the pullout. The due diligence was being done to determine whether the IDB would participate in the financing of the project.