Guyana endorses US$506M construction deal in China
US$840M Amaila Falls Hydroelectric Project…
The construction agreement of what would be Guyana’s costliest infrastructural project – the Amaila Falls Hydroelectric Project (AFHEP) – has been signed, government announced yesterday. Construction is expected to start in mid-2013.
According to a statement issued by the Government Information Agency (GINA), the Engineering, Procurement and Construction (EPC) agreement for the construction of the Amaila Falls Hydro project and Transmission Line was yesterday executed in Xian, China, by Sithe Global, the developer, and China Railway First Group (CRFG), the construction company.
There were no indications before yesterday that a government team had left for China for the signing.
The contract, valued at US$506M, was signed by Bruce Wrobel, Chief Executive Officer (CEO) of Sithe Global, and Dr. Sun Yonggang, Chairman of China Railway First Group (CRFG).
According to GINA, speaking at the signing ceremony, Finance Minister Dr. Ashni Singh described the occasion as a historic moment for Guyana and for Guyana-China relations. He alluded to “the strong historic relations between the two countries and the increasing role that Chinese enterprises are playing in the development of Guyana.”
According to the Minister, the Amaila Falls project presents an opportunity for these relations to enter a new phase as the project represents the single largest investment in Guyana and one of the largest Chinese investments in the Caribbean.
Also in China for the signing were Chairman of the Guyana Power and Light, Winston Brassington; Office of the President Advisor, Steven Grin, along with representatives of the Province of Shaanxi, the China Development Bank, China Export and Credit Insurance Corporation, the Inter-American Development Bank (IDB), and other representatives of Sithe Global and China Rail.
“This transformational project is the single largest investment in Guyana and will allow Guyana in one single step to move from being almost entirely dependent on costly fossil fuels to being supplied almost entirely by renewable energy. We are delighted to have such credible partners recognize the importance of the project and be ready to invest private capital in Guyana,” Minister Singh said.
Wrobel stated that, “We are pleased to be associated with this project, long in the making, that will make a huge difference to the people of Guyana and is representative of the globalised world that we inhabit, a project with many important players, such as the CRFG, CDB, IDB, the Government of Norway, and the GoG.”
The Chinese construction firm, CRFG, was founded in 1950 and is a state-owned entity, with over US$9B in annual revenue. It is part of China Railway Engineering Group, a company with over US$90B in revenue and the third largest construction company in China and one of the top 100 construction companies in the World, GINA said.
CRFG is headquartered in Xian, China.
Sithe Global is a fully-owned subsidiary of the Blackstone Group. Blackstone is said to be one of the largest private equity funds in the world with over US$120B under management.
China Development Bank is one of the largest commercial banks in China with assets in excess of US$900B. The project is being led by the Shaanxi branch of the CDB, in Xian.
The IDB is one of Guyana’s oldest development partners in the energy sector and an institution with over US$171B in capital.
In June, Sithe Global said that it was hoping to have financial closure on the project by March 2013. It has established a local company, Amaila Falls Hydro Inc. (AFH), to handle the project in Guyana.
There were no details in the statement yesterday as to whether there was financial closure for the project and how the US$840M will be spent.
During meetings in Guyana earlier this year, Sithe Global officials had offered a detailed look into the project costs, timelines and issues leading up to the financial closure of the project.
The company had also warned of cost increases.
“One risk of delay is that the project’s construction contract price could increase. Such increases could result from changes in foreign currency exchange rates or other factors. While previous currency adjustments resulted in substantial cost increases, the US Dollar to Chinese Yuan Renminbi foreign exchange rates have not moved significantly in the first half of 2012.”
The project has been marred by concerns over the high costs which started from US$600M and has risen to over US$800M without a stone being laid or a screw turned.
It was also hampered by the scandalous US$15.4M road project contract awarded under controversial circumstances to Makeshwar ‘Fip’ Motilall. The contract was terminated earlier this year because of the absence of a performance bond.
The Amaila Hydropower Project, (approximately 165MW capacity), to be located in western Guyana, in Region Eight, will include a new 270 km transmission line and new substations leading to Georgetown. Currently, nearly all electric generation in Guyana is provided through small units burning either diesel or heavy fuel oil. A significant portion of the country’s foreign exchange is spent on importing fossil fuel.