AFC says…No Amaila $$$ release until IDB due diligence completed
Despite the very real likelihood of Guyana facing penalties of not meeting a deadline later this year for financial closure on the US$840M Amaila Falls hydro project, the opposition Alliance for Change (AFC) says it will remain cautious, and not endorse the release of billions of dollars it blocked recently.
AFC Leader Khemraj Ramjattan
In fact, the party will await the completion of the ongoing financial due diligence by the Inter-American Development Bank (IDB), one of the main lenders for the project, before making a decision.
The project is on rocky ground at the moment, with miles of the access road leading to the site at the falls in Region Eight still incomplete, with a year-end deadline.
The project’s developer, Sithe Global, has signed an agreement with government to manage the facility and construction, and a separate one with the Chinese contractor, China Railway First Group.
Guyana has to finish the access road and have financial closure or face both Sithe Global and China Railway invoking penalty clauses which could see the country paying a percentage of the total project sum.
Financial closure has been pushed back time and again from since 2011 because of the delays of the road, and the demand by the IDB to carry out its own checks to determine the feasibility of the project. The IDB has been asked to plug up to US$180M into the project.
Yesterday, AFC Leader Khemraj Ramjattan said that his party is not aware of the full financial consequences, but acknowledged that there will be fallout.
Earlier this year, AFC and A Partnership for National Unity (APNU) blocked almost $20B from the National Budget, a significant portion representing Guyana’s stake in the US$840M project which is designed to reduce dependence on fossil oil power.
The access road faced time-consuming delays after the first contractor, Synergy Holdings Inc., was fired in January 2011, for not honouring contractual obligations. For the access road -110 km of new road and upgrades to 85 km of existing roadway- government has allocated $2.3B this year. Originally the project was to cost just over $3B. The delays have pushed the final cost of the Amaila Falls road closer to the $4B mark.
Dr. Roger Luncheon
Despite breaking the contract into sections, government continued to be challenged with delays caused mainly by the rough terrain. It was forced to take the drastic action of taking away the contract of the last section of the road leading to the falls and awarding it to China Railway, the contractor of the hydro project, in a bid to speed up work.
CAUTIOUS AFC
Ramjattan said the AFC was mindful of releasing the $20B for the project at a time when there is still uncertainty over the decision of the IDB. The bank is expected to announce its finding by the third or fourth quarter of this year.
“So if we front-end the whole set of money, we would have done a major, ill-advised project that will cost millions more.”
AFC and APNU have a one-seat majority in the National Assembly, since the 2011 General and Regional Elections, allowing the Opposition to control spending of public moneys from the Consolidated Fund for the first time in over 20 years.
“The people want to be cautious and we are only piggybacking on their caution. We are doing the right thing…the correct thing.”
China Railway, under an Engineering, Procurement and Construction (EPC) contract, will be building the 165 megawatts project for US$506M. Sithe Global had said that IDB would have completed its financial due diligence on the project by next month, but government announced revised deadlines to later this year.
Sithe Global, through its local operating company, Amaila Falls Hydro Inc., is hoping to have the project completed in three and a half years. It said it spent US$11M on third party environmental, technical and legal costs associated with the development and financing of the project. It will be contributing in excess of US$120M of equity funding during the construction period.
Worry
On Wednesday, Head of the Presidential Secretariat, Dr. Roger Luncheon, hinted of the government’s worry over the impending deadline. Luncheon said that given the validity of the Amaila Falls Hydropower Project agreement, financial closure, the access road to the facility, and the actual construction of the plant, have to be delivered in a timely manner.
Government is banking on the hydro power to meet growing demands and spur growth in the manufacturing sector.
Already, GPL is spending more than US$40M to rebuild aging transmission
The delays have pushed the final cost of the Amaila Falls road closer to the $4B mark.
lines along the coastland to reduce technical losses. Also being built are seven sub-stations and a state-of-the-art control centre at Sophia that will allow the company to effectively manage power coming from the proposed Amaila Falls hydropower site.