GEORGETOWN, Guyana, Tuesday August 11, 2015 – A hydroelectric project that the Inter-American Development Bank (IDB) once described as “the flagship of Guyana’s Low Carbon Development Strategy†has been scrapped, with government saying that it is too risky and expensive.
Minister of Finance Winston Jordan made the disclosure about the fate of the Amaila Falls Hydroelectric Project yesterday as he delivered the 2015 Budget.
He told Parliament that while the administration was prepared to explore every avenue to reduce the cost of energy, the project just did not make financial sense.
“As currently configured, it would not only be irresponsible, but a downright criminal act of deception, were we to proceed with the Amaila Falls Hydroelectric Project. Our investigations have revealed that at the current cost of almost $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,†he said.
That is in addition to Guyana’s contribution of at least US$160 million – US$45 million for the road, US$80 million equity through Norway, and US$35 million loan from the IDB – and the garnishing of US$65 million of the country’s foreign reserves.
Jordan said it would be “delusional†to think that GPL has the competence to handle such a financial burden.
“The GPL is known to have a poor operational, financial and technical capability. The company suffers from high energy and technical losses and fuel price volatility. It would require not only massive tariff increases, but guarantees that taxpayers, through the treasury, will provide transfers to meet this obligation,†he said.
“It also assumes that businesses would be willing to abandon their lower cost power generation and take the chance that GPL will be able to satisfy their energy demands. Added to this, is the fact that Guyana would be left with all the contingent risks of the project.â€
Jordan said that even the experts at the IDB had indicated the project would be too risky to attract financing from that institution.
Instead of pumping money into the hydroelectric project, he said, the government would adopt “a more integrated approach†to providing the country’s energy needs over the next five years.
“We will examine all sources of energy – fossil fuels, wind, solar, bagasse and, of course, hydropower. We will commence feasibility studies for a large hydropower development in the Mazaruni region. This will be done in collaboration with Brazil. We will encourage independent power producers and suppliers to construct energy farms and sell energy to the national grid,†he said.
Jordan added that government would also construct and/or promote the construction of small hydro systems in areas such as Moco Moco, Kato and Tumatumari, and power all new townships, starting with Bartica, using alternative energy sources.
The Amaila Falls Hydroelectric Project, started by a previous Bharrat Jagdeo administration, was initially expected to deliver a steady source of clean, affordable, reliable renewable energy to meet approximately 90 per cent of Guyana’s domestic energy needs and remove the country’s dependency on fossil fuels.
However, it struggled to get off the ground and was dogged by several controversies, including allegations of corruption being levelled against the Chinese firm that was awarded the contract to build the plant.
caribbean360.com
