A forum on the Amaila hydropower project yesterday heard key commentators restate their opposition to the scheme, citing likely tariff hikes of 23% and declaiming the estimated US$700M that the prospective developer, Sithe Global would have made from its US$157M equity injection.
Former Guyana Electricity Corporation head Ramon Gaskin slammed the now departed project sponsor Sithe Global saying that he is glad that the project is “dead”. He said that this would save Guyanese from the burden of tariff increases in the order of 23 percent from an equity arrangement that would have seen the main investor benefitting from a whopping rate of return of 19 percent.
He was yesterday speaking at a forum that the Working People’s Alliance convened at the Saint Stanislaus College on the controversy-wracked project which veered towards collapse two Fridays ago when Sithe announced it was quitting because of a lack of parliamentary consensus.
He said that because of the preferential equity that Sithe Global was able to come away from the deal with, it would be making some US$700 million and over at the end of the 20 years from its equity contribution of US$157 million. He called the deal that Sithe got with the rate of return criminal.
“I am glad it’s dead. I hope it [remains] dead. Lazarus was resurrected from the dead but the man who did that is not here,” said Gaskin in his usual animated manner.
He said that Guyanese consumers would have been saddled with tariff rate increases of about 23 percent if the project went forward in its present configuration. “I am prepared to show anyone how I have arrived at this figure because I have calculated it,” he said. “A 40 percent reduction in tariffs cannot pay for Amaila,” he said, disputing government statements that the project would lead to tariffs reducing by 40 percent in the first 12 years and further thereafter.
“GPL sets its own rates, not the Public Utilities Commission (PUC),” he said. “GPL’s licence allows it to do that,” he said.
Speaking at the forum, Member of Parliament for A Partnership for National Unity (APNU) Carl Greenidge said that a number of questions have been asked about the high rate of return for Sithe Global’s investment in the project. He said that in countries considered more investor friendly the average rates of return for similar investment lay in the neighbourhood of 14 to 15 percent.
He said too that the losses accrued by the GPL will have to be taken into account and paid for by someone and that someone will inevitably be the final consumer.
Greenidge said that Government’s discussions on hydro are all centred on Amaila, with no thought given to the possibilities of making Amaila one in a network of small to medium hydro schemes which could incrementally add to the generation capacity.
He said that it should be a worrisome issue that costs of power will increase after Amaila comes into being, since people spend most of their money on utilities, food and housing. He said that a hydro is not an end in itself. “You cannot eat it,” he said, making the point that its development and operation must lead to making lives better for the citizens of the country. “If the project is more expensive than it should be, it will be a burden on the taxpayer,” he said. He said that the financing costs are part of the reason the project is so expensive.
Independent verification
According to Greenidge, in discussions with the IDB, APNU said that the GPL should be replaced since it is inefficient and failed to bring down losses with a US$10 million programme funded by the IDB. The Bank said, according to Greenidge, that there could be other requirements placed on the project if it was deliberated on at the IDB Board meeting later in the year which no longer seems likely.
He stated that the APNU cannot support the project without an independent verification of its merits on a number of fronts.
In making his contribution to the forum, Professor of Economics Dr Clive Thomas made the point that despite the murmurings of government spokespersons that Guyana was not contracting any debt from the project, government would still be liable should the project fall flat. He said that this is so because of the concept of contingent liability. He said that these needs to be nothing in writing spelling it out but the mere fact that the project’s collapse could do irreparable harm to the national economy, Government by obligation will step in, as has been done in the United States and other places.
Thomas said that the high rate of return for Sithe Global shows the little confidence they have in investing in Guyana. He said that the private sector, some members of which are clamouring for the project, has no idea how much the project could negatively impact them.
He said too that Sithe Global must settle its moral and legal responsibilities in the case of the elderly woman whose house was burnt to cinders when a small American plane doing aerial surveillance work for the Amaila project crashed into it. Both the pilot and his passenger perished in that accident. No one on the ground was hurt.
Further, Thomas called the project misconceived and misconceptualised and said one of the main reasons he believed so was because of GPL’s own data suggesting that by 2019 its capacity would have been outgrown. As a result of this demand exceeding supply, tariff prices will rise, said Thomas.
He also commented about the final cost of the project negatively impacting consumers. “Enough has been revealed about the project to make it clear that the final cost to the consumer will be very high,” said Thomas. He said that by 2017, GPL’s tariff will be double that what it takes to produce electricity.
He also chided his colleagues in the opposition and in civil society for making flawed comparisons about hydro projects in various parts of the world, saying that hydro projects are not bought “off the shelf” but that they are tailor made to suit the specific conditions of the particular place. He said that it is better to examine the comparative advantages Guyana has compared with other places to determine how effective the project could be.
