Jun 16, 2012 News
Financial closure pushed back to 2013
Financial closure on the government’s US$840 Amaila Falls Hydro Project has been delayed by several months, the developer Sithe Global yesterday said.
It was anticipated that the project, which was touted to become the country’s largest infrastructure development in its history, would have been approved by lenders to enable a financial close by this summer.
“While that timing has slipped, our lenders remain supportive of the project. We have worked closely with the Inter-American Development Bank (IDB) to address its concern about Guyana Power and Light’s (GPL) technical and financial capacity,” Sithe Global said yesterday in a release by local public relations consultant, Cathy Hughes.
The company said that it is likely that financial closure may be by March 2013.
“Based on our discussions with IDB, we are hopeful that the project will be cleared to start final due diligence and documentation in July. The project’s financial close should occur some eight months thereafter. This delay is a disappointment to us, but we recognize that transformational projects of this nature require careful advance planning to ensure successful implementation,” the statement said.
Sithe Global has established a local company, Amaila Falls Hydro Inc. (AFH), to handle the project in Guyana. According to the US-based company, 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 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.”
However, Sithe Global said, it is impossible to predict future changes in currency rates or other factors.
“…meaning that the risk of price increases remains a serious concern until financial closing is achieved. We continue to work diligently to maintain the current construction pricing structure and maintain the viability of the project amidst the delays in securing the project debt from our lenders.”
Sithe Global insisted that the project remains fundamentally strong because it is the lowest cost option for GPL and its ratepayers.
“It continues to represent the best low-cost, long-term option to reduce GPL’s average generation costs and dependency on imported fossil fuels. Furthermore, it entails significant improvement of the electricity infrastructure in Guyana that will support Guyana’s overall economic growth and sustainable development, based on a clean, reliable and affordable electricity supply for its industries, businesses and residents.”
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 is to 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.
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