Prime Minister Sam Hinds says Guyana Power and Light (GPL) will not be made to pay for losses suffered from the Amaila Hydro project to Sophia, as the point of billing is the Georgetown substation.
He made the statement yesterday in response to concerns whether the government-owned entity would be made to pay for power as generated by Amaila rather than power actually delivered to Sophia. Sithe disclosed at a forum last week that some 14 per cent of the power generated will be lost by the time it gets to Georgetown. The project is said to be rated at 165 megawatts.
Former Guyana Electricity Corporation head Ramon Gaskin had said recently it is still not clear at which point Guyana Power and Light will be billing for the electricity lost from Amaila.
“GPL will not receive all of the power from Amaila. About 14 per cent of it will be lost. Is GPL going to pay for that? Where is the metering taking place,” he asked.
However, Hinds said that the point of billing is from Sophia since here is where the power will be delivered after generation at Amaila. “AHP will deliver power at Sophia,” he said.
Despite the losses en route to the substation, Hinds said that the project is viable given the reduction in tariffs it will engender. He said too that with the project, GPL will be weaned off subsidies and this could go towards lowering tariffs further and funding capital works.
He said that at the moment it costs 33 US cents per kWh to generate with petroleum. “We have losses at 32 per cent so the cost going to consumers is about $70 per kWh. However the average price paid is $64 when one considers the subsidy to GPL,” Hinds said. “When we go to Amaila the cost for generation will be about 12 US cents per kwh. By the time Amaila comes around, losses are expected to be in the region of 24 per cent and thus the final cost to the consumer is expected to be around $42 per kWh instead of $64 per kWh without subsidies factored in,” he said.
Liability
PM Hinds said Guyana may be liable to bear some of costs if it were to walk away from Amaila at this point.
Hinds said that while he does not think that Guyana will be financially penalised, each of the parties will have to bear some of the cost already outlaid on the project. He said that government may have to refund some amount of funds to Sithe Global.
According to a project summary shared with the opposition last week, Sithe has spent to date a total of US$16 million in engineering and design studies, environmental studies, legal fees, financing fees and other costs. “Sithe Global expects to spend another US$4 million to reach financial closure and cannot do so without parliamentary support at the next sitting and a commitment to finish the road by year-end,” Sithe said in its project summary.
Working People’s Alliance (WPA) member Professor Clive Thomas said that it is time for the government to scrap Amaila, cutting its losses in the process since the costs to the Guyanese consumer and taxpayer will be “humongous.”
Speaking at a press conference last week, Thomas said that Amaila was one of many “troubled” government projects and that it was mis-conceptualised and mis-specified. He said that it is troubling to learn that the Government of Guyana is the project guarantor and said that this raises Guyana’s contingent external liability to US$750 million or about 30 per cent of GDP. He noted that while the political risk for the project is shared among the project sponsors, the main burden of the commercial risk seems to be on GPL and by extension the Government of Guyana as project guarantor.
A Partnership for National Unity (APNU) is bent on withholding support for Amaila until it is convinced that the project is a feasible one and that it would not result in higher tariffs or unsustainable debt. Further, the party continues to be peeved at what it called the lack of disclosures of key studies demonstrating that the final cost to the consumer will be significantly less than at present as is parroted by government ministers in talking about the project’s benefits. However, the Alliance for Change (AFC) is said to be leaning towards supporting enabling legislation if they get their way with the amendments they are to propose.
Speaking at the stakeholder forum on Wednesday, government’s negotiator for the project, Privatisation Unit Head Winston Brassington made it clear that there is nothing in the contract which restricts the government from cancelling the current arrangement; he said however that the option would cost the country the investment which has been provided and discourage investment.
Brassington said that even if a decision were taken to pull out now, money will still be needed to complete the project, money which the GoG just does not have.
As such, he said, it is not practical to go back to tender, considering how far the project has come. He made it clear though, that Sithe is the partner which is standing the majority of the expenses, and will suffer the biggest loss if the project was to be discontinued.
