In a letter published in last week’s Sunday edition of all four daily newspapers, Rafael Herz, Sithe Global’s Project Manager for the AFHEP said that the price for the project would be US$650 million. This figure, according to Herz, included an estimated US$190 million for the transmission line and other supporting infrastructure. The government, in a recent release, however estimated that the entire project would cost some US$616 million. The release said the actual construction cost of the plant is US$450 million (US$306 million for the actual hydro construction and US$145 million for the transmission line, clearing of its corridor and for the road). According to the release, interest during construction, the debt reserve fund and construction contingency would account for US$165 million. This would put the project at a total price tag of US$616 million.
“Finance for this project comes from two sources–debt and equity,” the government said, as it stated that “the debt is expected to come from the Chinese and the IDB at single digit rates”. The statement said too that equity is being injected by Sithe Global LLC with the government having the option to inject funds and buy down the company’s equity. Herz had said that the US$15.4 million set aside for the building of the road to the site, is part of the government’s equity in the project.
According to the government, the equity of Sithe Global will earn 20 percent per annum, which it said was a lower rate than similar private sector infrastructure investments in other emerging economies. The administration also stressed that as the developer Sithe Global LLC is bearing “the development risk for the project.” The US-based company says it will contribute more than US$150 million in equity.
Meanwhile, Herz said that once the access road is completed and debt financing obtained, the intention is to start construction on the hydro plant in early 2011. According to him, “Sithe Global’s core management team has successfully led the development or acquisition of over 50 power plants comprising over 15,000 MWs globally.” He said that since combining forces with the Blackstone group in 2005, “Sithe Global has raised nearly US$3 billion in capital to finance three greenfield projects totalling 1.725 MV included the 250 MW Bujagali hydroelectric project in Uganda, which will effectively double that country’s generation.” This project plant in Uganda has been plagued with much controversy and 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 this would be the result.
Herz also said that 20 years after its completion, the hydropower plant will be transferred from private ownership and the property of the Guyanese government at no additional cost. The government said that after this period, the operating costs of the plant will be very low. “As a result of this project, and other savings in costs that GPL can achieve, GPL projects that average tariffs to customers can decline by 40% when the hydro comes on stream in 2014.
The project is supposed to see a 154-megawatt hydroelectric plant being built on the Kuribrong River, a tributary of the Potaro River in Region Seven (Cuyuni/ Mazaruni). The project has been on the cards for several years and has become even more pivotal with the government’s recent pursuit of a Low Carbon Development Strategy.
The project has caused significant controversy recently, especially after Synergy Holdings Inc was awarded the contract to build the access roads to the site. The concern has been whether Synergy Holdings has the experience and technical skill to build these roads. The government insists that it has but has not produced documentation to support this claim.
