Officials of Sithe Global, the developer of the Amaila Falls Hydroelectricity Project, say that the delay in financial closure of the project until next year will likely result in a higher overall contract cost since foreign currency exchange rates could change over the period.
But they maintained confidence in the project, saying it remains “fundamentally strong” because “it is the lowest cost option for GPL and its ratepayers.”
Government last indicated a contract price of US$835M, up by more than $200M from the previous price tag.
Continuing doubts by the Inter-American Development Bank (IDB) over the ability of the Guyana Power and Light Company (GPL) to effectively and efficiently distribute power from the proposed Amaila Falls Hydro Project is likely holding back the bank’s financial commitment and support, sources say. Up to April 2012, the IDB had listed Guyana’s Amaila Falls Hydro Project as being ‘in preparation’ on the ‘projects’ page of its website.
The recent wave of budget cuts by the combined opposition in Parliament claimed an allocation under the Low Carbon Development Strategy (LCDS) in the amount of $16.4B identified as government’s equity into the Amaila Falls Hydroelectric project.
Bruce Wrobel and Brian Kubeck, in a joint letter to the press, said Sithe Global was anticipating approval by lenders to enable a financial closure by this time of year. “While that timing has slipped, our lenders remain supportive of the project,” they said.
The duo said that the company has worked closely with the IDB to address its concern about GPL’s technical and financial capacity. “Based on our discussions with IDB, we are hopeful that the project will be cleared to start final due diligence and documentation in July,” they explained.
“The project’s financial closure should occur six to eight months thereafter. This delay is a disappointment to us, but we recognize that transformational projects of this nature require careful advance planning to ensure successful implementation,” they added.
Wrobel and Kubeck also said that one risk of the delay is that the project’s construction contract price could increase. “Such increases could result from changes in foreign currency exchange rates or other factors,” they noted.
They explained that while previous currency adjustments resulted in substantial cost increases, the US Dollar to Chinese yuan renminbi foreign exchange rates have not moved significantly in the first half of 2012. “However, it is impossible to predict future changes in currency rates or other factors, meaning that the risk of price increases remains a serious concern until we achieve financial closing,” they said.
“We continue to work diligently to maintain the current construction pricing structure and maintain the viability of the project amidst the delays in securing the project debt from our lenders,” they added.
They said the project continues to represent the best low-cost, long-term option to reduce GPL’s average generation costs and dependency on imported fossil fuels. “Furthermore, it entails a significant improvement of the electricity infrastructure in Guyana that will support Guyana’s overall economic growth and sustainable development, based on a clean, reliable and affordable electricity supply for its industries, businesses and residents,” Wrobel and Kubeck said.
In February 2012 during a visit to Guyana, President of the IDB Luis Alberto Moreno said that the IDB was supportive of the project. “… it is a project that we have been putting a lot of work into, it’s a huge challenge on the environment side, the distribution side…just the financing side we have been trying to put all the teams together and we will continue to work there,” the Government Information Agency (GINA) quoted Moreno as saying at the time.
