Open mind
There is something about the Amaila Falls Hydropower project that haunts this writer. There was nothing unique about the project because hydropower has been around for a long time in the world. Though exceedingly small, Guyana had a hydroelectric facility at Tumatumari. Besides, Guyana tried to build a much larger one than the Amaila project before. It is not the cost of the project either, even though the hydropower project that Guyana tried to build in the 1970s would have cost about the same as the Amaila Falls project and supplied about 10 times more the amount of energy than Amaila Falls would have done. This writer has already condemned the leadership that was given to the effort by the Ramotar administration to bring hydropower to Guyana. Whoever advised him not to make a deal with the AFC in 2013 so that the project could go forward, could not have had his best interest at heart.
Yet, there is a lesson in Amaila that goes beyond the obvious economic concerns related to its limited capacity and high cost. For this writer, that lesson is that we must keep an open mind at all times no matter how much an issue provokes one’s sensibilities. Had the PPP/C administration done so, it would have been clear that, despite its deficiencies, the Amaila Falls project carried with it some useful intangible benefits for the country that could have persuaded naysayers to support its construction. These intangibles were apparently regarded as useless by the PPP/C government given its decision to let the project go.
The Amaila Falls project did not start on a good footing and quickly gained the attention of the nation with a series of controversial decisions on the construction of the access road and the hydropower plant itself. That first set of concerns surrounded the company Synergy which was deemed incompetent to do the job. Yet it had some valuable intangibles such as widening the energy sources of Guyana and improving the competitive edge of Guyanese industries.
Price tag
Guyanese became even more concerned when the Jagdeo government presented the country with the capital cost of the project in 2010. The price tag of the project seemed to magically double from US$350 to in excess of US$600 million. This was the cost of constructing the hydropower facility and the infrastructure that enabled it to deliver service to the people. This expenditure was additional to the cost of constructing the access road to the site of the generating facility. To get a sense of what the decision meant to Guyana at that price tag, the cost was measured against the budget and the output of the country that existed at the time of the disclosure. While all of the money does not come out of the budget or the economy in any given year, the announced cost of the project amounted to 30 per cent of the output of Guyana in 2010 and 85 per cent of the budget of that year.
Financial findings
Those financial findings attracted the attention of many concerned Guyanese who began to internalize the magnitude of the investment and the risks that it posed for the taxpayers of the country. They rightly began to give greater critical attention to the project. The government could hardly defend the high rate of return to the investor and the extra debt that would have accumulated if it went ahead with the project. None of the burden of the debt would have been borne by the investor. Guyanese understood the importance of having some form of reliable energy supply. They wanted it, but never got it because of the intransigence of a haughty administration and its lack of desire for collective success. The principal investor withdrew from the project in 2013 and it collapsed when the National Assembly failed to increase the debt ceiling to accommodate the additional borrowing by the government. There was a glimmer of hope thereafter that the project could be feasible and might be revived. However, the Inter-American Development Bank (IDB) did not see it that way and the project lost its life-support.
In seeing how the Minister of Finance dealt with the Amaila Falls project in his maiden budget presentation, borrowing jargon from the healthcare field one gets the impression that the project is in hospice care and that arrangements for its final interment were likely to be heard soon. But the question remains, should Guyana be abandoning this project?
Wider energy policy
This writer believes that an effort should be made to revive the Amaila Falls hydropower scheme. Amaila Falls should be examined in the context of the broader energy needs of the country. If Amaila Falls could be properly situated in the framework of the wider energy policy of Guyana continuing the project might make sense. Guyana now knows that it has hydrocarbons, hydropower, solar and wind sources for energy. Among those choices, hydrocarbons stand out as very important because of the revenues that could be generated from the sale of the oil. But we need to examine hydrocarbons from the point of view of domestic consumption as well. Consumption on the coastline was likely to be easier than consumption in the hinterland. Comparatively speaking, hydropower consumption was likely to be easier in the hinterland than on the coastline because of the source of the supply. It might make sense therefore to examine the possibility of scaling down the area to be covered by the hydropower project in order to save on cost. What appeared to be an uneconomic project suddenly could have been a more profitable economic value.
Not only option
But that is not the only option available to the government. It is quite clear that the financing model employed by the government was unacceptable. Apart from the critique provided by the financial analysts of Guyana, the IDB has now said that the project was not feasible. The financing model involved a combination of taxpayer investment and taxpayer borrowing and a sliver of investor equity. The source of taxpayer equity was the money gotten from the low-carbon development strategy and the taxes that were paid to the government. The investor was providing technology, managerial expertise and a small amount of bridge financing. The borrowing was coming from China. Under that arrangement, the cost of the project had swollen to in excess of US$835 million. This represented about 86 per cent of the budget of 2013 and 31 per cent of the national economy.
Invite Guyanese investors
There is need also to examine an option which reduces the scope of the project and increases potential equity financing from taxpayers and other stakeholders. If Guyana can reduce the cost of the borrowing then it might be possible to reduce the cost of the project. Under such a scenario, the government might wish to consider inviting Guyanese workers, companies and Guyanese in the diaspora to invest in the project. Since total financing would not be required all at once, the shares could be purchased on an instalment basis.
