After months of negotiations, discussions for the Amaila Falls Hydropower Project (AFHP) between the government and China Railway First Group Limited (CRFGL) have ended in deadlock.
The parties, according to Vice President Bharrat Jagdeo, could not arrive at a mutually agreeable financing model.
Jagdeo told Stabroek News yesterday that government had no other choice but to terminate the months-long negotiations as CRGL was unable to put up the financing for the controversy-ridden project.
“It’s ended. We have to go back to the drawing board and possibly re-tender at some point in time in the future… right now we are still deciding whether we will go out to tender and in what form, but most likely it will be BOOT (Build, Own, Operate and Transfer) again…” Jagdeo said while responding to questions on the sidelines of the opening of the National Toshaos Conference at the Arthur Chung Conference Centre.
Jagdeo also said that there is no commitment at this point in time to re-tender for the project as the government is now focused on getting the Gas to Shore Energy project off the ground. Nonetheless, he stated that government will continue to work to have the hydropower project actualized as part of its energy generation. The country’s energy mix included AFHP along with solar farms and the gas to energy project to aid government’s goal of achieving the cutting of carbon emissions by 70% by 2030. “We hope to get it and it is still on the cards but currently not moving,” he said of the project.
In May, Jagdeo had disclosed that CRFGL had advised they were “having a hard time doing the BOOT Contract and they want to shift to an EPC (Engineering, Procurement and Construction) plus financing, where the government finances the project and they will be the contractors.” The suggested model of financing by CRFGL was not in compliance with the terms under which the company bid for the project. Jagdeo had said “they simply can’t raise financing,” when asked about the challenges in the negotiations. The project would have cost roughly US$1B. Since last November government has been in negotiations on the project, which has been on and off its agenda for over 15 years.
“The last six months we have been struggling to reach an agreement. We will have to give a deadline and cancel if they can’t proceed with the original model…The tender was about Build, Own, Operate, Transfer, not a EPC Plus finance model…so we may have a setback on that,” Jagdeo said in May during a Press Conference.
Jagdeo responded in the negative when asked if there are considerations to engage the second most competitive bidder, stating that that bidder proposed a higher retail selling figure per kilowatt per hour – US 9.9 cents. CRFGL, in their bid, proposed to sell electricity to the government at US$0.07737 per kWh. With the gas to energy project set to come on stream some years from now, Jagdeo said it would not be feasible to lock in an agreement to purchase electricity higher than US 6 to 7 cents per kilowatt hour. He stated that when the project was initially conceptualised and undertaken by Sithe Global, a subsidiary of Blackstone, government was prepared then to purchase electricity at US 10 cents per kilowatt per hour since Guyana was generating electricity at twice that cost.
At the May press conference, Jagdeo, when questioned on whether government is prepared to engage in an EPC financing model should they return to tender, said there has been no consideration regarding the utility of that model and extensive discussions will have to be undertaken before a commitment can be made. The contention then was that the BOOT model chosen for the construction of the AFHP was well thought out since government did not want to incur any debt. Under the BOOT arrangement, CRGL would have operated the project for twenty years before transferring it to government. CRGL was awarded the contract on Cabinet’s no-objection after being deemed the “most capable partner” for the project. A release from the Ministry of Finance had said that the Chinese company will provide the entire equity required and undertake all the risks associated with the project without Guyana investing any finances.
Jagdeo last November had said “Amaila still remains the best option for meeting baseload renewable energy for Guyana. That is the only way you can decarbonise, so the only way to achieve renewable energy is through the construction of the hydropower,” while making reference to a Norway study done after the former David Granger-led administration took office. He explained that despite the delays and shelving of the project by the APNU+AFC coalition-led government in 2015, Guyana stood to benefit from a better deal. According to Jagdeo, in the initial deal, electricity would have been purchased at US 10 cents per kWh, but under the new deal GPL will be purchasing electricity at US 7 cents per kWh or lower. The hydro project, previously pegged at US$858.1 million, was the pre-2015 PPP/C government flagship project. However, then opposition A Partnership for National Unity (APNU) and the Alliance For Change (AFC) used their joint one-seat majority to effectively halt the project. Once in government in 2015, the APNU+AFC coalition scrapped the project, citing costs and other concerns, while signaling that it was focusing on an energy mix with natural gas as a prime component.
CRFGL has recently been caught up in the controversy swirling around VICE News broadcasts about the activities of Chinese businesses here.
In a statement on Sunday, it said that it abides by the laws of Guyana and it expressed “strong indignation” at claims made in the recent broadcast by VICE News.
On Thursday, US-based VICE News relayed an extended version of its video report on ‘Guyana For Sale’ which examined the operations of Chinese businesses in the country and challenged Vice President Jagdeo on government corruption. Jagdeo has vehemently denied the insinuations against him and has said that he intends to sue the middleman, Su Zhirong who made the claims in the programme.
In the Thursday segment, VICE News reporter Isobel Yeung recorded a number of Chinese businessmen operating in Guyana admitting to laundering money and paying bribes to the government in order to gain priority access to lucrative contracts as well as to be able to further their investments here. A report on this segment was carried in Friday’s edition of Stabroek News.
On Sunday, the statement by China Railway traced its presence here since 2008 – when it made a bid for the Amaila Falls Hydropower Project – and accused VICE News of spreading untruthful information. It also distanced itself from Su.
“CRFG hereby solemnly states that CRFG has never signed any agreement with Su Zhirong, nor has it conduct(ed) any actions that were shown in the foot-age”, the statement said.
