US$840M Amaila Fall hydro…IMF warns govt. to ensure project makes economic sense
-wants “careful considerations” of risks, contingent liabilities
The International Monetary Fund (IMF) has called on Government to take steps to ensure the economic viability of the multi-million-dollar Amaila Falls hydro-power project. The recommendations were noted in a statement from the fund yesterday on the recently concluded Article IV consultations with Guyana, a member state. 
IMF’s examinations are carried out primarily through annual consultations between Fund staff and member governments and central banks. These meetings are known as Article IV consultations, as they form part of the IMF’s Articles of Agreement. On November 9, IMF’s Executive Board concluded these negotiations with Guyana. Speaking on the Amaila Falls project which is expected to cost upwards of US$840M and will become Guyana’s most expensive project ever, IMF said that based on findings they are recommending “steps to ensure that the Amaila Falls Hydropower project is economically viable.” For an operation to be economically viable, it simply means that it must be able to earn enough revenues to meet its expenditure. IMF’s Executive Board also “recommended careful consideration of the risks and contingent liabilities arising from that project, and welcomed the authorities’ efforts to pursue international best practices in its management.” There have been critical concerns over the costs of the Amaila Falls project, set to be built in Region Eight. The project which will include creating reservoir, building a station and running transmission lines to the coast, has been described as a key project, by government, to help reduce electricity costs and ensure a stable supply. The peak demand in Demerara for power is around 80 megawatts. Of special concern also is whether the costs of the project and the terms of repayment of the loans that would be financing it, would not see electricity costs soaring in Guyana… never mind the savings on imported fossil fuel for generators that would be made with the advent of the hydro. Costs for financing the loans, interests and insurance take a significant portion of loans pushing the final figure now around US$840M. Fluctuations of the dollar could see the costs rising even more. The 165-megawatt project is to be built in Region Eight and according to Sithe Global, the US-based developer; IDB will be plugging in US$175M, from the Inter-American Development Bank (IDB). Funding for the project is coming from a number of sources including US$100M in equity from the Guyana Government. The project has been dogged by delays ranging from financial closure to the completion of the roads leading to the project site at Amaila Falls. It will be recalled that in January, Government dismissed the contractor, Synergy Holdings, after delays and failure to acquire a performance bond in time. Government had to re-issue the road projects in four separate contracts. It is unlikely, given the weather and harsh terrain, that the mid-2013 deadline for the hydro project to start, will be met. China Development Bank will be providing US$413.2M. Sithe Global will be providing US$152.1M. The total capital costs for the project, according to the Sithe Global officials earlier this year, will be US$652.5M, taking into consideration additional construction, development, start-up, as well as a contingency. The remaining US$187.8M will go towards financing costs which include interest during construction (US$97.1M), lenders fee and advisory cost (US$34.9M), and debt political risk insurance (US$55.7M). The plant is expected to cost US$314M, with the transmission lines demanding some US$126M. The additional US$79M is for currency adjustments. At a projected average tariff of US$101M, the plant is expected to rake in more than US$2B over the 20-year period on the Build, Own, Operate and Transfer (BOOT) life of the project. The plant is slated to last for at least 75 years.
