Prime Minister justifies Fip’s ‘sale’ to Sithe Global
Prime Minister Samuel Hinds has responded to two headlines in the private media. In a letter to the editors Hinds said, “The headlines of Stabroek News(SN) of 2011-05-12, “Motilall sold Amaila licence to Sithe”, and of Kaieteur News (KN) of the same date, “Fip flips licence to Sithe Global” do our people and country great harm.”
“Mr Motilall and his partners have expended cash and invested lots of unpaid time in this development since he first began in 1997. From the work done along the way unto the entry of Sithe Global in 2007, an estimate of cash expenditure approaching US$5 million and unpaid time and other costs exceeding US$5 million is not unreasonable.”
The suggestion is that Makeshwar Fip Motilall should be paid at least US$10 million for the licence.
The Prime Minister said that since the mid-1980s Amaila was recognized to be an interesting site “for development, perhaps the site that best matched our needs.”
He said that Mr Motilall began considering and pursuing that development in 1997; applied for and was granted an MOU in early 1998 on which he had Kleinschmidt & Assoc of Portland Maine, make a desktop prefeasibility study.
However, documented evidence showed that Motilall signed a Memorandum of Understanding on May 23, 2006. The signatories were Prime Minister Hinds; Ronald Alli as Chairman of Guyana Power and Light; and Makeshwar Fip Motilall on behalf of Synergy Holdings Inc. (See below).
On July 31, last year, when a copy of the Memorandum of Understanding was shown to Prime Minister Hinds and he was asked about the signing he said that he could not recall any such signing.
When pressed further, even when shown his signature, he said that he signs many documents on a daily basis.
The Prime Minister further said the questions being posed to him were specific to the MOU which was not at hand, hence, he was not in a position to provide answers. He then asked that the questions be forwarded to his office.
Yesterday, he remembered, not only Motilall signing, but every detail of the hydroelectric project pursued by Motilall.
He said, yesterday, “With a favourable outcome, Mr Motilall continued working, seeking partners at that stage and had HARZA Engineering (now MWH) prepare a feasibility study, partly for cash payment and partly for a carried interest.
“On the basis of the positive Feasibility Study an Interim Licence was applied for and granted in 2002 and work continued with the production of an EIA. Financial and all closure was close at hand with Scudder Latin America Fund and Leucadia about to take the lead, but among other things oil price was low, less than US$30/barrel; financing costs were high for this then purely privately financed project; the projected cost for electricity was greater than electricity from HFO fuelled stations, and the outward repayment cash flows were greater than fuel purchase flows. That arrangement fell apart.”
He justified Motilall selling the licence to Sithe Global.
“Synergy won the interest and attention of Sithe Global, now a part of the Blackstone Group. In time, as Sithe Global worked its way into the role of leading partner to take the Amaila Falls Hydropower project to construction and operation, on the request of Synergy and on the Government’s own consideration and demand, a new Interim Licence was issued in the name of Sithe Global in October 2009.”
The Prime Minister added, “It is quite standard practice that a pioneer having developed a project to a certain point finds a bigger, stronger partner to take the project forward.
“The pioneer is rewarded in part or in whole with a cash payment at the time and some equity interest in the realized project.
“Depending upon the profitability of the project the pioneer would receive a multiple of his investment in cash and time. Of course the many more times when the project dies before realization, the pioneer receives nothing.”
Observers said that Motilall stands to receive many multiples of his investment. But this was a man who could not find US$24,000 to pay taxes in the United States.
He has however been awarded a US$15.4 million to construct a road leading to the Amaila Falls hydro power construction site. This contract was granted although all the evidence suggested that Motilall never built a road of any sort.
Yesterday, Prime Minister Hinds said that Motilall spent millions on the Amaila Falls project.