Amaila hydro cost “a downright criminal act of deception”
– Finance Minister says final tab at US$2.6B
Guyana’s plan to build the 165-megawatts hydropower facility at the Amaila Falls in the manner that was pushed by the previous administration was not only irresponsible but would have been “a downright criminal act of deception”.
Presenting his first National Budget yesterday in the National Assembly, Finance Minister Winston Jordan disclosed that currently configured, the project which has been suspended would have cost of almost US$1B, making it easily the most expensive project ever for the country.
Based on figures, it was found that the Guyana Power and Light Inc (GPL) would have been required to make annual payments amounting to US$130M to the operators of the hydro facility, costing the country a whopping total of US$2.6B over the 20-year commitment period of the power purchase agreement.
“Mr. Speaker, this does not include Guyana’s contribution of at least US$160M (US$45M for the road, US$80M equity through Norway, and US$35M loans from IDB (Inter-American Development Bank); and the garnishing of US$65M of our foreign reserves.”
The project, the brainchild of the Bharrat Jagdeo administration, was shelved in the last Parliament after the Opposition which had the majority raised questions over the costs and other issues. They voted a key piece of environmental legislation that was required by IDB, one of the financiers, effectively stalling the project.
According to the Finance Minister, even the IDB considered the project too foolhardy to proceed over the financial structure.
“We know now, that as configured currently, the cost of financing is too high, and that unless the price tag can be substantially lowered, we cannot proceed. In this opinion, we are strongly supported by the experts at the Inter-American Development Bank, who had considered the project to be too risky to attract the Bank’s financing.”
The minister insisted that Government is well aware of the importance of clean, reliable and affordable energy for development and the improved welfare of the people.
“As such, we are prepared to explore every avenue to reduce the cost of energy – including examining the Amaila Falls Hydroelectric Project.”
With regards to the capacity of the state-owned Guyana Power and Light Inc (GPL) to manage the hydro project, the official was convinced that it was delusional to suggest that the company had the competence to handle such a financial burden.
“The GPL is known to have a poor operational, financial and technical capability. The company suffers from high energy and technical losses and fuel price volatility. It would require not only massive tariff increases, but guarantees taxpayers, through the treasury, will provide transfers to meet this obligation. It also assumes that businesses would be willing to abandon their lower cost power generation and take the chance that GPL will be able to satisfy their energy demands. Added to this, is the fact that Guyana would be left with all the contingent risks of the project,” he warned.
Jordan said it is a fact that the identification of Amaila Falls, as a potential site for hydropower, dates back some 40 years, and that his Government would welcome the diversification of the country’s energy matrix to include clean, sustainable and affordable sources.
“Over the next five years, we will adopt a more integrated approach to providing for our energy needs. We will examine all sources of energy – fossil fuels, wind, solar, bagasse and, of course, hydropower.”
He said that the government will commence feasibility studies for a large hydropower development in the Mazaruni region.
“This will be done in collaboration with Brazil. We will encourage independent power producers and suppliers to construct energy farms and sell energy to the national grid. We will construct and/or promote the construction of small hydro systems in areas such as Moco Moco, Kato and Tumatumari, and will power all of our new townships, starting with Bartica, using alternative energy sources.”
