Jul 05, 2022 News
Kaieteur News – A proposed hydro electric plant, complete with dam, reservoir and transmission line from the Amaila Falls location to Georgetown, is key to the Guyana Government’s electricity generation plans, since the viability of the overall arrangement depends on each component being constructed.
These include, the construction of a Gas to Shore initiative meant to supply some 250 mega watts (MW) of electricity to the national grid and its supporting infrastructure and the 165 MW Amaila Fall Hydro Electric Plan, which has since been shelved again, at least for now.
Head of State, President Irfaan Ali last week declared that despite the hiccups, government was not going to abandon the project.
He was at the time speaking during a critical briefing held at State House, to outline the course forward on the gas to shore project. According to President Ali, that project is currently undergoing a process but was adamant in pronouncing, “…let me be very clear, we are not going to abandon this project, if we have to go out again and again, we will.”
He qualified this position saying, “we know the studies, including the independent review by Norway, which has pointed to this project as being good for Guyana, being good for the environment and bringing greater prosperity.”
As such, President Ali said, “…so this project will get underway.” He did not apprise the audience that a contractor that had been selected for the project had walked away from the project recently, claiming, according to Vice President Bharrat Jagdeo, that it could not raise the funds to proceed with the initiative under the proposed Build Own Operate Transfer (BOOT) model.
Jagdeo during a press engagement at Office of the President had said that the company, China Railway First Group had wanted to change the terms of the agreement to proceed under an Engineer Procure and Contract kind of contract, since it could not raise the money to finance the project.
Kaieteur News reported a month ago that almost two decades since it was first promulgated as a solution to Guyana’s energy demands but had to be shelved on many occasions, the once again resuscitated 165 Project has again been met with another snafu as was confirmed by Vice President Jagdeo. According to the Vice President, the contractor had as late as April 22 last, written to the government “saying that they are having a hard time doing the BOOT contract and they want to shift to an EPC plus finance” option instead.
He had explained that under an EPC contract, it would mean that the government would have to secure the finances for the project and that they would be used as the EPC contractor.
As such, Jagdeo disclosed that in light of the developments, government may very well have to retender the project. “We have been in discussion with the company since November last year, the discussions, the negotiations are very difficult,” according to Jagdeo who indicated that, “in the negotiations, we are still trying to get them to meet the commitment that they bid.”
Explaining the situation at the time, the Vice President had sought to remind that during its most recent incarnation, where Sithe Global of the Blackstone Group had been selected as the Project developer, the electricity was supposed to have been sold to consumers at a generation cost of US$0.10 (cents) per kilowatt hour (KwH).
The Chinese bid, he said, had committed to 7.7 Kwh but are now saying, “they can’t go ahead with the BOOT; they want to change the basis to an EPC.”
He was adamant; however, “if we can’t change that, if we can’t get it done under the BOOT, we will have to retender, they would not be able to conclude the construction, because that is what the tender was about, a BOOT model not an EPC+ finance model.”
He told members of the press corps “…in the last six months or so, we have been struggling to reach an agreement and so we are now going to have to give a deadline to cancel; if they can’t proceed as the original model so we may have a set back there on that.”
Asked to provide further clarity on the contractor’s position during the ongoing negotiations, Jagdeo divulged that it was not a case of the Chinese not being in favour of a BOOT arrangement but rather “they simply can’t raise the financing, because of that.”
Under the BOOT, arrangement, he said, it “meant they had to build it, own it and supply us with power at a particular price and then 20 years after, transfer it to the government for free, because that is what they bid on.”
In such an arrangement, Jagdeo said, “…we would not have any debt, there would be no debt associated so that model, they are saying they can’t pursue.”
According to Jagdeo, the Chinese are requesting that government contract the debt and use them as the contractor “so we said we did not bid for that.”
He noted, nonetheless, that in such a situation, government would have started the process all over again by retendering.
Senior Minister in the Office of the President, with responsibility for Finance, Dr. Ashni Singh in January last had announced that the Chinese contractor, who was granted approval to construct the Amaila Falls Hydropower Project, would commence operations on the mega venture this year. He was at the time presenting Budget 2022 to the National Assembly, “regarding renewable and low carbon energy, our most promising venture continues to be the AFHP (Amaila Falls Hydropower Project) with an expected capacity of 165 MW.”
He informed then that government had already requested, received and evaluated proposals for the project and negotiations were in progress with the ‘highest ranked company’ China Railway First Group (CRFG) – the same company that had previously signed a contract to build the said project several years ago.
Jagdeo in November of last year, during a press engagement, told reporters that a decision had been taken by Cabinet that government would be approaching the selected contractor to negotiate on the way forward. The Ministry of Finance, in a subsequent public missive corroborated the Vice President’s assertions saying, that Cabinet had given its ‘No Objection’ to the company, as evaluated by the National Procurement and Tender Administration Board (NPTAB).
In this regard, the AFHP was to be developed under a BOOT arrangement where the developer would operate the project for a 20-year period before handing it over to the government, at no cost. Jagdeo at the time, in defending the move to retender the project said that the second closest bidder would not be feasible since the cost would work out to more than that of the Gas-to-Shore project. It should be noted that under the most recent iteration of the project as presented, Guyana was to stand the majority of the major risks involved in the project.
These include those related to political force majeure, payments risks in the event that electricity sold is not sufficient to meet the PPA demands, and hydrology where Guyana stands the risk associated with the likelihood of there being insufficient water supply, meaning if the Amaila Falls runs dry, among other risks.
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