Amaila Falls Hydro Project… Controversy surrounds Sithe Global licence

May 19, 2011 | By | Filed Under News 

Controversy surrounds the licence Sithe Global says was handed to it by Synergy Holdings, the original developer of the US$700 million Amaila Falls Hydro Electricity Project.
Yesterday, Head of the Presidential Secretariat, Dr Roger Luncheon, said that it was a question of semantics whether Sithe Global has an altogether new licence or whether the licence which it now has is the old licence with some amendments.
James McGowan, Senior Vice President (Development) at Sithe Global said recently that his company had “acquired the licence from Synergy Holdings.”
“Sithe Global and its affiliate Amaila Falls Holdings have since acquired 100 per cent interest in the project from Synergy,” McGowan has said.
But yesterday, Dr Luncheon could not say definitely under what licence Sithe Global was pursuing its development of the project which is touted to generate 165 megawatts of electricity that would be sold to the Guyana Power and Light under a Power Purchase Agreement that is still being worked out.
On October 8, 2009, Prime Minister, Samuel Hinds, signed for Synergy Holdings to transfer its 13-year-old interim licence to Sithe Global for the development of the Hydro Project.
That interim licence which was transferred to Sithe Global expired at the end of 2009, according to the agreement, but “shall be read with all its amendments and extensions thereto overtime.”
Hence, Dr Luncheon suggested that the licence which Sithe Global has could be an amended version of the licence which was handed to Synergy.
He said that the agreement now in place “is not precisely as it was in the first Government and Synergy agreement” and spoke of “a variation of the old agreement reflecting the more mature, the more experienced, the more financially secured entity, Sithe Global.”
According to Dr Luncheon, in the cases of such licensing agreements, the original licence and the engagement more often than not carry a certain amount of exclusivity, in which the two parties involved agree not to involve third parties.
He indicated that Synergy Holdings, under Fip Motilall, after 13 years of having the licence, decided it could no longer undertake the project.
He said that in crafting such licensing agreement, it could be that at some point in time, when the process has “matured” and after the original developer would have made “significant investments”  that he decides he needs to hand over to a “more experienced player in that same field.”
“So I might start out drilling and I get all of the information and I realise this is big stuff and its exploitation might need ‘Big Brother’ on board,” Dr Luncheon stated.
In such a case, he said the arrangement in transferring an exclusive arrangement between the government and the original investor to a new investor involves the repudiation of that exclusivity.
“The exclusivity would have to be waived and abolished and the original Synergy, might then allow the government to hand over or to be a party to handing over their agreement to Sithe Global and bringing Sithe Global on board may allow them to fashion aspects of this existing agreement,” Dr Luncheon explained.
Regarding the legal stipulation that the President has to be the one to consent to the transfer of a licence, Dr Luncheon suggested that the Prime Minister signed off on the agreement with the consent of the President.
He explained that Government Ministers (Hinds being the Minister for the electricity sector) act after a consensus decision is made at Cabinet, which is chaired by the President.
“So we don’t have in the collective cabinet a sector Minister who sits elsewhere independently generating decisions and policy.
We meet statutorily by recognising that it is the Minister’s decision, but behind all of that is the collective cabinet chaired by the President and that is where the responsibility ultimately derives – the chairman of Cabinet, the President – and the Cabinet recognised for its advisory role,” Dr Luncheon explained.
Sithe Global has said that Synergy Holdings is entitled to financial compensation upon successful completion of the project.
Synergy Holdings Inc. was first listed as the developer to design, build, own and operate a hydroelectric plant in Guyana.
After the transfer of the agreement, Synergy Holdings was granted a US$15.4 million contract to build the access roads to the proposed site for the hydropower plant.

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