In a letter today to Stabroek News and Kaieteur News, Prime Minister Sam Hinds defended businessman Fip Motilall over his trading of the licence for the Amaila Hydro Plant to Sithe Global.
Below is the text of the letter:
Dear Editors,
The headlines of Stabroek News(SN) of 2011-05-12, “Motilall sold Amaila licence to Sithe”, and of Kaieteur News (KN) of the same date, “Fip flips licence to Sithe Global” do our people and country great harm. SN and KN prefer to continue the innuendos about some sort of corruption and to be flippant about this tremendous development for our people and country, rather than to take the opportunity to educate our population at large, about what is a very common way in which big projects, such as the Amaila Falls hydropower project, get done.
The fact is that there are 100 or more good starts for every large project that makes it successfully to realization, and a particular idea may start and die a number of times before it becomes reality! We in Guyana have a good example in Omai – known to have gold since about the 1880s, with a German Company setting up an operation there in the 1890s, Anaconda in the 1930s; then Golden Star, one of the Junior Mining Companies as they are called, picking up the property in the mid 1980s, doing a lot of drilling, expending a lot of money, then seeking a big partner to take things forward. Placer Dome was interested for a while then Cambior came along: the mine was developed, and the mill was built, and in that partnership Golden Star received 35% of the shares for the prospecting work it had done.
Now back to Amaila. Since the mid 1980s, Amaila was recognized to be an interesting site for development, perhaps the site that best matched our needs. Mr Motilall began considering and pursuing that development in 1997; applied for and was granted an MOU in early 1998 on which he had Kleinschmidt & Assoc of Portland Maine, make a desk-top prefeasibility study. With a favourable outcome, Mr Motilall continued working, seeking partners at that stage and had HARZA Engineering (now MWH) prepare a feasibility study, partly for cash payment and partly for a carried interest. On the basis of the positive Feasibility Study an Interim Licence was applied for and granted in 2002 and work continued with the production of an EIA. Financial and all closure was close at hand with Scudder Latin America Fund and Leucadia about to take the lead, but among other things oil price was low, less than US$30/barrel; financing costs were high for this then purely privately financed project; the projected cost for electricity was greater than electricity from HFO fuelled stations, and the outward repayment cash flows were greater than fuel purchase flows.
That arrangement fell apart: Mr Motilall and his partners in SYNERGY continued working to refine the project, seeking and meeting other partners. Government was satisfied with their periodic reports and from time to time judged that it was reasonable to extend the Interim Licence. Eventually, Synergy won the interest and attention of Sithe Global now a part of the Blackstone Group. In time, as Sithe Global worked its way into the role of leading partner to take the Amaila Falls Hydropower project to construction and operation, on the request of Synergy and on the Government’s own consideration and demand, a new Interim Licence was issued in the name of Sithe Global in October 2009.
Mr Motilall and his partners have expended cash and invested lots of unpaid time in this development since he first began in 1997. From the work done along the way unto the entry of Sithe Global in 2007, an estimate of cash expenditure approaching US$5 million and unpaid time and other costs exceeding US$5 million is not unreasonable.
It is quite standard practice that a pioneer having developed a project to a certain point finds a bigger, stronger partner to take the project forward. The pioneer is rewarded in part or in whole with a cash payment at the time and some equity interest in the realized project. Depending upon the profitability of the project the pioneer would receive a multiple of his investment in cash and time. Of course the many more times when the project dies before realization, the pioneer receives nothing.
SN and KN who may see themselves as paragons of private enterprise would know this and should not insinuate differently to the public.
I hope that this response would be given prominence equivalent to the unkind headlines of 2011-05-11.
Samuel A. Hinds
Prime Minister
Below is the story that appeared in today’s edition
Motilall sold Amaila licence to Sithe
-will be compensated on successful completion of project
After acquiring the licence to develop the Amaila Falls Hydropower plant, Synergy’s proprietor Fip Motilall has sold it to Sithe Global and will be compensated on the successful completion of the long-awaited project.
The disclosure of the trade came at a public forum yesterday convened by Sithe Global. The revelation raises questions about whether Synergy could have been considered a serious contender for the licence in the first place and why Motilall would sell it if he was committed to developing the first major hydro scheme here. About eight years after