Jul 18, 2013 News
‘Brassington wants us to believe the world will end’
Failure to get full financing for the US$840M Amaila Falls hydro project before year-end could see the final costs rising even more. There is also the very real possibility of the banks and contractor walking away.
Guyana will end up losing millions of dollars from what has already been spent and from possible penalties. This is according to Winston Brassington, Executive Secretary of the state’s investment agency, National Industrial and Commercial Investment Limited (NICIL). NICIL is the agency that is overlooking the project for Government.
The project, the largest ever infrastructure facility that Guyana has ever attempted in terms of costs and scope, is intended to reduce Guyana’s dependence on imported fossil fuel.
However, the hydro project has been facing one delay after another, with Government admitting recently that it needs to pass two critical pieces of legislation before a July 30, deadline. The passage of the two Bills are a prerequisite of the Inter-American Development Bank (IDB), one of the financial institutions that has been approached to fund the 165-megawatt project that is to be built on the Kuribrong River, in Region Eight.
A local company, Amaila Falls Hydro, Inc. (“AFHI”), a subsidiary of the US-owned developer, Sithe Global, is spearheading the project.
Questioned about the implications of the July 30 deadline not being met, Brassington yesterday pointed to the US$506M Engineering, Procurement and Construction (EPC) contract signed with the Chinese contractor, China Railway First Group, back in September last year.
That contract was supposed to expire in June but there was an extension to this year-end after some “tough negotiations,” the official disclosed.
According to Brassington, should IDB, which is to plug US$175M, not approve the loan in time, it will make the contract with China Railway ineffective. With the contract hinging on certain prices, including labour and exchange rates, any extensions beyond 2013 is more than likely to have implications on the final US$840M price tag.
Recently, the Private Sector Commission (PSC), a grouping of businesses, including commercial banks and manufacturing entities, was updated on the project. The body which has been complaining about electricity costs has been vocal in its support of the project.
Brassington said that the worst case scenario is if the loan from IDB is not approved and the contractor and other stakeholders walk away.
However, that is an unthinkable position for Guyana as significant sums have been spent already on the access roads leading to the site in Region Eight.
Brushing off criticisms that the deadline of July 30, is a smokescreen created to pressure the Opposition to pass two legislations, Brassington said that between the end of July and October when the IDB’s Board of Directors meet, a series of documents have to be submitted by AFHI. These include positive news that the two legislations have been passed. Documents will also have to be translated and a number of other internal processes have to be followed before that October meeting.
Brassington also said that should the contract not become effective by the end of the year, Guyana would not be liable.
The two Bills that have to be passed before July 30 are the “Guarantee of Loans (Public Corporations and Companies) Act and “Hydro-Electric Power (Amendment) Bill 2013”.
The ‘Hydro-Electric Power (Amendment) Bill 2013’ is a piece of legislation which creates a protected area for biodiversity conservation and is reportedly a prerequisite for IDB Board’s approval of the project.
The “Guarantee of Loans (Public Corporations and Companies) Act” will, once passed, allow Government to raise its guarantee limit from $1B to $150B (US$750M). The new proposed limit of $150B (US$750M), is needed to guarantee that the Guyana Power and Light Inc. (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), the local company that will be managing the project. GPL is the state-owned power company.
However, yesterday Member of Parliament (MP), Joe Harmon, of the Opposition’s A Partnership For National Unity (APNU), made it clear that his party is not to be hurried on the Bills.
The MP said that Government knew along that there were amendments to the laws yet waited until the last moment to table them.
“Some of these are artificial (being used) to try to pressurize us in National Assembly and give an impression that the whole world will end if not passed.”
Harmon also criticized the PSC and the Georgetown Chamber of Commerce of Industry, two business bodies, for buying into the “deadline propaganda” being fed to them.
Yesterday, the Opposition was set to meet with the Caribbean manager of IDB to learn more.
Another advisor is “working pro bono (free) to advise us.”
Harmon, who was one of the MPs who demanded a visit to the troubled access roads currently under construction, also made it clear that the Opposition is concerned about the project. The opposition voted billions of dollars to the roads.
“So no one can accuse us of not being serious; we have allocated billions. Yet they wasted time and waited until now to create this deadline to pressure us…We will not be rushed.”
Yesterday, GCCI said joined the PSC in urging for the bills to be passed.
“If project financing does not materialize, let it be as a result of the failure of the project to meet financial and economic viability benchmarks of IDB’s assessment and not as a result of the failure of our political leaders to pass requisite legislation that compliments the project and informs the IDB’s decision making come July 30.”
Of the US$840M for the hydro facility, US$100M is coming from the Government in Guyana; US$175M from IDB; US$152M from Sithe Global while US$413M will be coming from China Development Bank.
The hydro project will reduce electricity costs and see Guyana owning the facility in 20 years. It is also expected to reduce the amount spent on importation of fuel.
The project is expected to have a life of approximately 75 years.
Earlier this year, the Opposition blocked almost $20B in funding for the project, citing concerns over costs, among other things.
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