Canadian consultants found Synergy lacked ‘capacity’, needed partner
Government’s eight-month deadline stipulated for the construction of the access roads to the Amaila Falls hydropower plant appears to be unrealistic based on the review of the project’s original feasibility study by Canadian consultants Kaehne Consulting Ltd, who also said that Synergy Holdings did not have the financial, technical capacity or experience to develop the project on its own and needed to partner with another corporate entity.

Synergy Holdings, the company controversially awarded the contract for the first phase of the project, is required to construct approximately 110 kilometres (km) of virgin roadway within eight months.  However, in 2002 Kaehne Consulting Ltd had estimated that a road of 41 km in length needed to be constructed to facilitate the hydropower plant and that this would take 12 months.  The administration, however, has now tasked Synergy Holdings with completing almost three times the original estimated length of road in ⅔ of the time originally set. Synergy Holdings Inc already faces questions about its road-building capacity.

During the eight-month time frame, Synergy is also required to upgrade approximately 85 km of existing roadway, and design and construct “two new pontoon crossings at the Essequibo and Kuribrong rivers.”  The company is also required to clear a pathway alongside the roadways to allow for the installation of approximately 65 km of transmission lines. The Request for Proposals (RFP) for this phase of the Amaila Falls Hydroelectric project (AFHEP), states that construction would take place on a “time of the essence” basis and must be completed by the end of the eighth month following the Effective Date of the Agreement.

In 2002, when Kaehne Consulting Ltd conducted a due diligence review of a proposal from Synergy Holdings Inc and Harza International Development Company LLC of Chicago, Illinois, it was for  a 100 MW generating plant at Amaila. This review was financed by a grant from the United Nations Development Programme  In their review of accessing the site, the consultants said that “before construction can commence, a new road must be constructed from Pamela Landing to the site.” They estimated the distance of the road to be 41 kilometres. “This road must be sufficient load capacity and width to allow the transportation of the major earthmoving equipment required to develop the site and the installed equipment, the heaviest item of which will be the transformers at approximately 100 tonnes each.”  It said too that “normal road weight limit is 18,000 lbs per axle and minimum road width is 22 feet.” One new bridge was required, the review said, and several culverts were needed to ensure adequate drainage.

“In addition to the proposed access road which is to be located along the top of the two dams, it is recommended that alternative road access to the powerhouse be provided via a new road along the bottom escarpment and a bridge across the Kuribrong River,” the consultants said.   It was emphasised that the airstrip needed to meet statutory requirements and that the developers needed to obtain all relevant permits and approvals to construct and operate the facility.

“The developers have also advised that a permanent airstrip will be built at Amaila. This will be essential once construction begins for ferrying the supervisory and senior labour force to and from site and for carrying out medical emergency evacuations should that be necessary,” the report said.

The consultants also said that “the overall development process involving preconstruction activities and project construction is expected to require 4 to 5 years to complete.”

In relation to the funding of the project the report said that Synergy Holdings did not have the financial or technical capacity or experience to develop the project on its own and that it needed to partner with another corporate entity.  “With due respect to Synergy, it is obvious that this corporate entity does not have the financial or technical capability or the project development experience to develop the Amaila project alone and this is not its intent,” it said. The report went on to say it was important for Synergy to finalize the new corporate entity.

Subsequently, Fip Motilall, the President of Synergy Holdings, advised the consultants that possible development partners included Leucadia National Corp, ABB and IFC. Harza would remain as owner’s engineers, the review report stated.  However, Sithe Global LLC has now been identified as the financial backer for the project.

The Amaila Falls Hydroelectric Project (AFHEP) has been described as a development project that would significantly reduce the cost of electricity in the country while being more environmentally friendly. President Jagdeo, during a recent trip to Wakenaam, told residents that the plant when completed would result in the cost of electricity being one third of what is now being sold by the Guyana Power and Light (GPL), a release from GINA said. “It could reduce consumers’ bill, it would lead to industrialization because of cheaper reliable power and US$100 million that we spend every year to import fuel to generate electricity, the country will save that so it will have a big impact on our balance of payment and therefore, greater stability on our exchange rate and inflation rate,” GINA quoted the President as saying

Motilall, in an invited response to a letter published in the April 8 edition of this newspaper, said that when the project was completed, “the cost of the power from Amaila to GPL is going to be less than 50% of what it costs to produce with fossil fuels.” He stated too that in 20 years the project would be turned over to Guyana without any cost attached, and from this point to the next 80 years, Guyanese would be able to enjoy a generation cost of ¼ of a cent per KWH.

However, experienced engineer Malcolm Alli, in a letter published in Friday’s edition of this newspaper, contended that suggestions that “the hydropower would cost pennies per kilowatt-hour is nothing more than a pipe dream.”

Estimating a US$600 million price tag for the project, Alli argued that based on a 25 year capital cost recovery, the developer for the project would have to pay back the lenders approximately US$71.2 million per year based on an 11% interest rate. Guyana is currently seeking funding for the plant from the Inter-American Development Bank and the China Development Bank.

Alli argued that added to this the country also had to take into account the developer’s profit, transmission and distribution costs, and costs for road and plant maintenance.

According to him, since the government would be purchasing the power produced for a period of 25 years, the cost to the government may be the same as the present rate per KWH or even more.

He noted too that the government will also have to allow for the Kingston power plant to be in an operational state at all times during and after the construction of the hydro-plant.  According to him, at the end of the 25 years, the government would also have to refurbish the turbines and generators at the plant and this would be an extra cost to the government.

The developer for the AFHEP is Sithe Global Power LLC. This company is part of a consortium of sponsors currently building a 250 MW hydropower plant in Uganda which is proving to be one of the most expensive in the world, with a price tag so far of US$860 million.

Recent reports indicate that when completed the dam would not result in lower electricity tariffs for Ugandans in spite of promises from the project sponsors that it would.