‘Guarantee’ for GPL payments to hydro plant heads to Parliament

Jun 26, 2013 News

The Guyana Government will tomorrow formally move to petition the National Assembly to resolve to increase the aggregate amount of the liability of the Government under the Guarantee of Loans (Public Corporations and Companies) Act.
Finance Minister Dr Ashni Singh, by way of Motion tabled in the National Assembly, scheduled for debate tomorrow, has indicated that it has become necessary to specify a greater sum for the purpose of enabling the aggregate amount of the liability of the Government “in respect of guarantees to be increased due to the extended activities of those incorporated bodies to which the Act applies in accordance with the country’s development programme.”
Dr Singh is also expected to argue that under the Guarantee of Loans (Public Corporations and Companies) Act, the Government may guarantee the discharge by a Corporation of its obligations under any agreement which may be entered into by the Corporation with a lending agency in respect of any borrowing by that Corporation that is authorised by the Government; Assume such other obligation as may be agreed between the Government and a lending agency in relation to or pursuant to any such agreement; Undertake the repayment to a lending agency of such sums as the lending agency may have advanced to or for the benefit of the Government.
Earlier this month, Dr Singh, by way of a public missive from his Ministry, had indicated that the Government is looking to increase the limit on total guarantees that can be issued under the Guarantee of Loans (Public Corporations and Companies) Act.
The new proposed limit is $150B (US$750M) and according to the Ministry of Finance, the proposed increase in the guarantee limit follows on the commitment to the Amaila Falls Hydroelectric Project.
The increase seeks to guarantee that the Guyana Power and Light (GPL) honours its financial commitments under the Power Purchase Agreement (PPA) to be entered into between the power company and Amaila Falls Hydro Inc (AFHI).
Under the PPA, GPL commits to purchase the power from Amaila for an average annual capacity payment.
Government’s obligation is in the form of a Performance Guarantee.
The Ministry of Finance says that “the Performance Guarantee is not a guarantee of debt but rather a guarantee of GPL’s obligations under its Power Purchase Agreement (PPA) to pay for power delivered from the hydro facility.”
The guarantee limit was last raised in 1980 from $500M to $1B.
Based on the US Dollar exchange rate in 1980, the guarantee at that time was equivalent to US$400M. Adjusted for US inflation from 1980 to 2013, the equivalent figure in US dollar terms, today, would be US$1.1B.
Meanwhile, Prime Minister Samuel Hinds is also expected to pilot debate for an amendment to the Hydro-Electric Power Act, in the National Assembly.
The Bill confers on the President, the power to create hydro-electric offset reserve areas and rules for the establishment of the said areas, and for the conservation and preservation of the environment and ecosystem surrounding the hydroelectric resources in Guyana.