Minister of Finance Winston Jordan in his budget presentation yesterday said that currently the cost of financing the Amaila Falls Hydropower Project (AFHP) is too high and the Inter-American Development Bank (IDB) considered the project too risky to attract the bank’s financing.
The declaration would seem to be the end to what was the former PPP/C government’s most ambitious project to diversify energy sources and what would have been the most expensive in the country’s history.
“Mr. Speaker, this Government is well aware of the importance of clean, reliable and affordable energy for development and the improved welfare of our people. As such, we are prepared to explore every avenue to reduce the cost of energy – including examining the Amaila Falls Hydroelectric Project. The problem, Mr. Speaker, is that as currently configured, it would not only be irresponsible, but a downright criminal act of deception, were we to proceed with the Amaila Falls. Our investigations have revealed that at the current cost of almost US$1 billion, the Guyana Power and Light Inc (GPL) would be required to make annual payments amounting to US$130 million to the operators of the hydro facility, which will total US$2.6 billion over the 20-year commitment period of the power purchase agreement,” Jordan told parliamentarians.
“We know now, that as configured currently, the cost of financing is too high, and that unless the price tag can be substantially lowered, we cannot proceed. In this opinion, we are strongly supported by the experts at the Inter-American Development Bank, who had considered the project to be too risky to attract the Bank’s financing,” he said.
The David Granger administration was reviewing the project and was awaiting an assessment from the IDB to decide on whether to proceed and the IDB’s assessment means that the government would not proceed with the project in its present form though Jordan said that there is still interest in alternative sources of power. The IDB is holding US$80 million from Norway in its accounts as Guyana’s equity in the project and Guyana was also seeking a loan from the bank for the AFHP.
When in opposition, both APNU and the AFC had criticized the Bharrat Jagdeo and Donald Ramotar administrations for the lack of transparency surrounding the AFHP. The AFHP was the flagship project of the Low Carbon Development Strategy and was supported by Norway but has struggled to get off the ground even as it was enveloped in several controversies. Norway last year transferred US$80 million earned by Guyana for limiting deforestation, to the IDB as Guyana’s equity in the project.
Since the project was first announced, costs of the 165-megawatt hydro venture have escalated from the original US$450 million to US$858.2 million up to 2013. The costs for the access road had ballooned from US$15 million when the contract was signed in 2010 to US$43.5 million last year.
