Amaila represents a liability for taxpaying dollars
… Govt. admits this by looking to guarantee GPL payments- Ram, Gaskin
“The savings that are being touted by the Government and the Private sector Commission are false and spurious.”
The Guyana Government, by its action in seeking to raise the debt ceiling in order to guarantee payments by the Guyana Power and Light (GPL) for the Amaila Falls Hydro Electric Plant, has acknowledged the debt implications of the project.
From left: Ramon Gaskin and Christopher Ram
Government in a public statement on the matter and through various pronouncements by its officials maintained that it is not doing any borrowing for the project.
Financial Analyst, Christopher Ram and Ramon Gaskin have since responded to critics publicly by stating that, “by going to the National Assembly to increase the debt ceiling in connection with Amaila, the Government acknowledged the debt implications of the project.”
The fact is that the Government, not Sithe Global, is guaranteeing the Power Purchase Agreement which requires GPL, a fully-owned state company, “to pay a monthly Capacity Tolling Fee that includes the payment the debts and their related costs, the annual repayment of Sithe’s capital and its returns, and the operations and maintenance cost of Sithe’s operating company.”
According to Ram and Gaskin, “by the Government’s own reckoning, the debt elements alone exceed US$2B over 20 years…Since the Government agrees to pay that debt if the company defaults, this is what accountants call a contingent liability.”
In addressing the claim by government that there will be a reduction in the tariff that will be charged to consumers of electricity the two maintain that it will in fact be increased by 23.6 per cent.
According to the duo “our projections were further based on no more subsidies from the Consolidated Fund and GPL’s Licence rate of return which Sithe imposes as a condition in the Power Purchase Agreement.”
They say that the increase in tariff after Amaila is unavoidable because of the exorbitant US$858M cost of the project “and the unconscionable rates of return to Sithe (19 per cent tax free), China Development Bank (8.5 per cent tax free) and the IDB (9.35 per cent tax free).”
The duo maintains that “it is abundantly clear that a 40 per cent reduction will not cover Amaila’s charge of US$122M at an exchange rate in 2017 that even the Government projects will be more unfavourable than it is now, let alone pay for fuel and run the GPL.”
“We are prepared to provide our projections for public scrutiny if the Government is willing to provide its projections and related documents showing tariff reductions of 40% and 20%.”
According to Ram and Gaskin, any serious discussion of subsidies to the power company must start with the reality that GPL is an extremely inefficient organisation with system losses exceeding 30 per cent for decades.
“Unless and until GPL attains some moderate level of efficiency, a lot of the power bought from Amaila will not be sold and billed to anyone…The savings that are being touted by the Government and the Private sector Commission are false and spurious.”
Responding to claims of savings on the purchase of fuel with the coming on board of the Amaila Falls Hydro Electric plant, both Ram and Gaskin said that while there will be a saving this will all be poured into the prohibitively high debt servicing.
“The entire savings on fuel will be spent on the prohibitively high debt service to Sithe, China Development Bank and the IDB…Sithe alone will get back US$720M for its $150M.”
The two have since said that it is unfortunate that the entire debate has been shaped by the false premise of “Amaila or no Amaila and the falsehood that Amaila is without serious risks.”
The duo maintains their support for hydroelectric power but is opposed to the current project given the risks and costs.