State received value for money with Amaila Falls road, Motilall made lowest evaluated bid

Dear Editor,

I crave your indulgence, to put the record straight and provide some insight into some questions raised by our Honourable Minister of Finance, Mr. Winston Jordan, as presented in the report in Kaieteur News of Monday, July 02, entitled,

“Guyana has to buy out Sithe Global before it can start Amaila Falls project: Jordan challenges Jagdeo to explain how ‘Fip’ Motilall won the rights to Amaila and how a US$15M road cost overUS$50M”

Editor, Guyana does not have to buy out Sithe Global, not against our wishes, before we can (re)start the Amaila Falls project, but buying out Sithe Global’s proprietary (knowledge) rights can be to our advantage in both money and time. Prior to May 2015, an agreement had been completed for Guyana to acquire (if we so wished) all the designs, studies and approvals then held by AFHEP (Amaila Falls Hydroelectric Project) including the Environmental Impact Assessment at one-quarter of the independently audited third-party costs incurred. 

Acquisition of the ownership of the private company owned by Sithe Global for the development of Amaila, as well as all the intellectual property owned by Sithe, at less than a quarter of the actual sum expended, would have secured the ownership rights to all the studies and works to develop Amaila including all feasibility studies, environmental studies, technical studies, legal work including all the contracts to proceed, financial studies, etc.  Was the Government to start over without ownership of this information, it would require years of work and considerably more expense. At the time of the May 2015 elections, the PPP Government had positioned Amaila to start construction by the end of 2015, whereby by end of 2019 (next year), Amaila would have come on-line with 165 MW of power delivered to Sophia at a price of approximately US10 cents per kWh.

The IDB execution of a mandate letter in early 2015 with China Railway, along with its agreement and acceptance of the GRIF deposit from Norway of US$80M, signaled IDB’s commitment (and conditions) for the advancement of this very important transformation project for Guyana and the world. APNU knows fully well that by the time they took office, agreements were already in place with the IDB, Norway, Sithe Global, and China Railway as successor to Blackstone, that would have seen conclusion of all the requisite details to start construction of Amaila by the end of 2015.  Instead of progressing the Amaila project that would have seen power in the grid by next year, APNU, like it did with Blackstone in 2012, scuttled this most important project.

Editor, when the PPP/C entered office at the end of the PNC period, access to natural resources was by application on a ‘first come-first served’ basis. Towards the end of 1997, Mr. Motilall applied for and in time was granted permission (and rights) to conduct studies for the development of Amaila Falls, according to the Hydropower Act. There were no other known interests in the Amaila Falls at the time. Other small, initial developers applied for and were granted permission to pursue studies for the development of a number of other sites. Ultimately, such early developers hand over to larger, more experienced firms with deep pockets which might eventually build the project.  This procedure is also quite common in the mining sector. Older Guyanese would recall the Junior mining company, Golden Star, undertaking the prospecting of Omai whilst looking for a larger company to take Omai to construction and production: at first it was to be Placer Dome then Cambior. The records will show that Mr. Motilall actively pursued the development of Amaila, entering into an early partnership with Harza Engineering then Synergy and into negotiations with Scudder Latin America Power Fund which ended when agreement could not be reached on the BOOT transfer pricing. Towards the end of 2006 Sithe Global was attracted as a credible core investor and was given command of the project.

Editor, about 2011, advertisements were published inviting bids for the construction of the Amaila Falls Access Road (AFAR), in a number of lots but not including the Essequibo and Kuribrong river crossings which were still to be determined. There were a number of bids – the one submitted by Mr. Motilall was the lowest evaluated bid at US$15M and that contract was awarded to him at his bid prices. His overall bid price was generally considered to be low, popular opinion was that it would cost more like US$22M. I here repeat the call by our Leader of the Opposition, the Honourable Mr. Bharrat Jagdeo, for the bid evaluation report to be released into the public. And, also, I want to bring to public attention the large number of contracts which our Coalition Government is granting without going through the lawfully required bidding process; and when put to bid, a number not being awarded to the lowest evaluated bidder. There are many such infractions in this area of renewable energy, particularly for PV solar installations.

 Mr. Motilall encountered difficulties from the beginning –- be assured that he received progress payments not based on his expenditures but only for measured work at the rates in his contract. Eventually, Mr. Motilall’s contract was terminated for non-performance. Payments to him totaled less than the US$15M that he had bid and various penalties were pursued including seizure of his assets which attracted media attention and approaches to the Court.

To better meet deadlines at the time, the completion of the AFAR was arranged through negotiations and entering contracts with several well positioned and interested contractors, some of whom had bid on Amaila road initially. These contractors also experienced delays and difficulties. My recall is that total payments for construction of this AF Access Road (not including charges for maintenance and for monitoring and controlling the use of this road which penetrates virgin forests) did not exceed US$30M, no way close to the US$50M claimed by our Honourable Minister.  The increased cost of the road included expansion of the scope of work and bridges.  For the record, whether Fip Motilall, or some other contractor undertook the work, the State received value for money.  It is a fact, that there were no less than six contractors working on the road and all delivered work at a unit price higher than Motilall, yet all experienced challenges and delays.  Today, the road is finished and benefits many including the the mining sector. The expenditure is not lost as the road has benefits now and will be available when a decision is taken to proceed with Amaila.

Editor, allow me to admit that I have been completely surprised at the negative attitude of the then Opposition which they have continued now in Government, to the development of the Amaila Falls, when Amaila was one of the six sites recommended for development in the hydropower studies of the 1970s to the 1980s initiated by the Burnham/PNC Government of those days. I thought that they would have claimed Amaila as their own. Amaila was a prime site recommended to supply electricity for local demand, excluding any specific large need as for an aluminium smelter. Editor one is left to wonder why our Government would have so misrepresented the recommendations of the Norconsult report – they portrayed Amaila as inadequate when the Norconsult report pointed out that for our Government to meet its offer of 100% ‘Green’ electricity by 2025, it must not only proceed to construct Amaila quickly but, additionally, immediately begin studies to construct a second similar sized hydropower site on completion of the construction of Amaila.

Editor, we Guyanese have been losing much time and money over the last three years.

Yours faithfully,

Samuel A. A. Hinds

Former Minister Responsible for

Electricity and Energy

Former Prime Minister and Former

President

 

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