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That hydropower arrangement

Apr 17, 2010 Editorial

Any government should be proud of its relationship with the private sector to the extent that the public sector is often willing and ready to partner the government in investments. This has recently been the case in Guyana, given that it is sometimes difficult to get foreign investors for certain projects.
Perhaps the most significant to date has been the Berbice River Bridge. This was a project that has been in the making for nearly five decades. However, the government either could not raise the money on the international scene or they allowed the project to simmer in deference to other national projects. The government, in keeping with an elections promise, set about building the Berbice Bridge. It got money out of the National Insurance Scheme but the bulk came from the private sector. There was money from some insurance companies, including the now defunct Colonial Life Insurance Company, from some commercial banks with vast cash deposits, and from non-bank sources.
This was the largest public-private sector participation until now. But even before the bridge, the government was seeking a similar partnership for power generation. It invited bids for Guyana Power and Light because it wanted to get out of private business. No one took up the offer and the result is that government is stuck with a company that operates in an autonomous manner.
That might have been one failed venture in the electricity sector. However, the government has succeeded in securing private participation in another electricity entity—Amaila Falls hydro project. The private funding is coming from an established and world renowned entity.
Sithe Global, a subsidiary of the Blackstone Group, is now the preferred private sector group. It is touted to provide 100 per cent equity in the project. This means that Sithe Global would execute the hydro project and sell power to the Guyana Government.
If Sithe Global is going to hold all the equity in the project, then someone must explain the drive by the government to raise funds for the project. Someone must also explain why the government feels that it must seek money from international funding institutions, knowing that its agreement with Sithe Global covers all the funding for the project.
Head of the National Industrial and Commercial Investments Limited (NICIL), Winston Brassington, offers a plausible explanation. He said that if the government undertakes certain aspects of the project then it would not only expedite the completion of the project, it would also lower the project cost as well as shorten the project time.
If there is need for the government to seek cash to hasten the project, when would Sithe Global come up with the cash? Is the money being raised by the government an advance to Sithe Global? The government would pay interest on the loan. Would this interest be accommodated in the final sum of the hydro project?
Undoubtedly the hydroelectricity project is critical to Guyana’s development. It can boost industrial development, result in lower electricity charges for consumers, and increase the reliability of power. Many years ago the authorities recognised that if Guyana was to smell alumina then it needed hydroelectricity.
But there is something else that needs to be considered. It would seem that from the inception, Government would be ensuring cheap electricity because it would be reclaiming its money from the sale of power to the grid. However, the people would be paying almost the same amount because the government would want to collect the money it advanced for the project. However, this money would actually be money coming from the agreement with Norway through the forest preservation deal that the two countries reached. One must now ask whether it may not be a good thing for the government to go the project alone. The money is coming from Norway and not from the public treasury. This should be used for the benefit of the people.
Unless as reporters we are missing something; unless the aim is to boost the country’s foreign reserves, unless there are other significant projects that must be undertaken there seems no real reason for contracting out the hydroproject.

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