Dear Editor,
I refer to SN’s article titled, ‘IDB vital for Amaila hydro $$ as World Bank say no‘ (January 25), and KN’s parallel coverage on the same date in the item captioned, ‘Loans of US$588 million will cost Guyana US$187 million in fees during construction alone.‘
In both of these news stories, Mr Bruce Wrobel, CEO of Sithe Global, is reported to have explained that the cost of the (Amaila Falls) project increased significantly because of rising commodity prices, unfavourable currency movements, and political risk insurance costs.
First, I thank Mr Wrobel for the courtesy of his time and explanation(s). Second, I agree with the CEO that significant movements have occurred in the price of commodities, and in the currencies he identified. Now, I have some questions for him.
Would Mr Wrobel (or his authorized delegate) be kind enough to inform and enlighten the Guyanese public by answering the following: 1) What are the specific commodities involved? 2) Were the appropriate protective hedges thought of, purchased, and implemented to limit the risk and reality of escalating prices relative to these commodities? 3) More specifically, did Sithe Global move to contain price exposure through hedging with Futures contracts for both impacted commodities and relevant currencies? 4) If yes, were such Futures contracts purchased in a sufficient quantity? 5) If yes, were they ‘rolled over‘ upon expiration to maintain coverage and protection? 6) If the answers to questions 2 through 5 are all ‘yes‘, and given the price containment they would have afforded, could additional details be provided as to the real source(s) of the significant (and continuing) escalations in the original contract price? If the answers to the same questions are no such hedges were purchased, then the automatic and reasonable follow-up question must be: why not?
As examples, large farmers and airlines routinely move to limit exposure and ‘lock-in‘ prices of agricultural produce and aviation fuel respectively through the purchase of Futures contracts; this is, so to speak, a bread and butter part of their operations and existence.
Accordingly, one would think – and I certainly do – that an entity with the size, scope of operations, and experience of Sithe Global would (or should be) engaged in such hedging and price containment exercises. This should be so, since even the ordinary man-in-the-street is aware that commodities and certain currencies have been in an almost continuous rising price environment for several years now. It would be interesting to hear what the company has to offer.
It is time to move away from the Sithe Global side of this problematic project. On the Guyana side of the negotiating and deal-making table, it has been obvious for a long time that those who represent this country lack the requisite acumen and sophistication to participate in the white knuckle exchanges and eyeball to eyeball confrontations that are part and parcel of these projects and contracts. Time and again, when these matters somehow seep into the public domain, it becomes clear that those representing the Guyanese people have been left holding the short end (and the dirty side too) of the stick; that they are victimized, overwhelmed, and embarrassed; and that the shortcomings of these deals – mainly secret – leave the taxpayer paying through the nose. One only has to recall from long ago, the GPL and Irish investors; and more recently the questionable revelations from the HPS on the onerous associated costs to rescind those even more questionable contracts executed last year. It must be stated that the mistakes made seem to keep repeating themselves; no lessons are learned; and the minutiae and details are not sweated thoroughly and painstakingly. Instead of corrective action, the public is treated to the pathetic defensive postures, the sordid tirades and abuse, and a continuum of insults to its intelligence by men sorely lacking in the same themselves. Does anyone care enough to do anything about this?
In the meantime, I now wait on Mr. Wrobel.
Yours faithfully,
GHK Lall
