GPL’s debt will climb from US$621M to US$1.7B with Gas-to-Energy project – Int’l Report

Oct 07, 2023 News

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Kaieteur News – An alarming report from the US based Institute for Energy Economics and Financial Analysis (IEEFA), paints a bleak financial future for the Guyana Power and Light (GPL).

As the gas-to-energy project gears up for operations just before the 2025 General and Regional Elections, the report states that GPL stands at the precipice of a massive debt crisis. The American research institute warns that substantial bailouts will be essential to counter this spiraling debt, with a significant portion likely to be siphoned from Guyana’s largest source of income: its oil resources.

This comprehensive study, collaboration between Tom Sanzillo, the Director of Financial Analysis for IEEFA, and Cathy Kunkel, an esteemed Energy Consultant at IEEFA, meticulously breaks down GPL’s 2023 Development and Expansion Programme.

The findings are concerning, indicating that the utility company’s debt will swell dramatically through 2027. The report projects a staggering rise in GPL’s indebtedness to the Guyanese government, skyrocketing from US$621 million in 2023 to an overwhelming US$1.7 billion in 2027, primarily fueled by the gas-to-energy initiative.

The experts also contrasted the projected debts from GPL’s previous five-year plan (2022-26), which anticipated an indebtedness of US$716 million by 2026, with the current projection. This older plan had even envisioned a more aggressive infrastructure development, adding 20% more power generation than the 2023 blueprint, yet it was based on sales projections that were a whopping 65% higher for 2027.

Furthermore, the report emphasized that even the Guyana Public Utilities Commission had voiced reservations about the predicted debt in the 2022-2026 plan, signaling potential unsustainability. And, alarmingly, the current trajectory has more than doubled this already worrisome level of debt.

Among other concerns, the IEEFA report sheds light on GPL’s opaque financial forecasting regarding the gas-to-energy project. It also questions the comprehensiveness of the projected expenses, such as annual pipeline payments to ExxonMobil.

The IEEFA researchers concluded, “It is evident that the 2023 plan shows GPL going into debt at a much faster rate than previously anticipated, overbuilding its generation system and providing electricity at rates that do not cover costs. GPL also has no plan for paying off its central government loans. GPL’s financial projections for 2024-2027 reflect paying a very nominal level of interest (an interest rate of less than 1%) on its central government loans.”

As Guyana grapples with balancing legacy debts, costs related to new energy initiatives, and the prospect of rate reductions, the financial strain on its annual budget will be palpable, even when factoring in the potential revenue from its burgeoning oil and gas sectors.

The IEEFA’s warning is clear: this financial quagmire should deeply concern every Guyanese citizen and calls for pressing parliamentary representatives for increased transparency and accountability concerning GPL’s economic stability.

BACKGROUND ON GAS PROJECT

The Peoples Progressive Party Civic’s (PPP/C) plan for a gas-to-energy project entails partnering with ExxonMobil Guyana Limited to construct a massive 218 km offshore pipeline structure that would bring gas from the Stabroek Block’s Liza field onshore and feed into two facilities, a Natural Gas Plant and a 300MW Power Plant, both to be situated at the Wales Development Zone.

The 12-inch pipeline being constructed by Exxon will have the capacity to transport 50 million cubic feet per day (MMcf/d) from the offshore Liza field, and will be able to deliver a minimum volume of no less than 10 MMcf/d. The Government of Guyana and US consortium, LINDSAYCA/CH4 on December 13, 2022 signed the contract for the construction of the integrated Natural Gas Liquids Plant and the 300-megawatt (MW) combined-cycle gas turbine (CCGT) power plant at Wales, West Coast Demerara (WCD), Region Three. The historical signing of the contract for the US$759 million project took place at the Office of the President, Shiv Chanderpaul Drive.

In January 2023, President Irfaan Ali witnessed the signing of a contract between the Guyana Power and Gas Inc. and Engineers India Limited (EIL) for the provision of Consultancy Services for the Wales Natural Gas Liquids (NGL) facility as well as the 300 megawatt (MW) power plant. That contract is pegged at US$22,143,190.

The consultancy is for the Consultant to assist the Government of Guyana through the Gas to Energy Task Force in the design review, construction, supervision and general project management of the development of the integrated plants, and contract administration throughout the project implementation process and thereafter during the defects liability period. Government has said project generation costs, taking account of payment for the pipeline, operations and maintenance, and capital cost recovery will total less than five US cents per kilowatt-hour.

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• ExxonMobil, General and Regional Elections, Institute for Energy Economics and Financial Analysis (IEEFA), Office of the President, Shiv Chanderpaul Drive

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