Serious questions remain on the exploding cost of the Amaila project

I welcome Mr. David Gopaul’s letter (‘Ram is attributing additional costs to the Amaila hydro-project based on pure speculation’ SN April 18, 2013) for providing me with the opportunity to ask him to obtain and share vital information about Amaila which Guyanese have for years been seeking. Before doing so I will briefly address his lengthy letter.

One approach could be to quote Mr. Gopaul’s preferred article in Hydro Review magazine which set out Canadian cost models for hydro projects that are conceptually, in terms of both engineering and financing, and technologically, different from Amaila; or I could choose to provide cost information on projects from the USA, Ethiopia, China and Turkey, which in each case is lower than Amaila’s. I could even refer him to Brazil which built a project of approximately the same size and capacity for US$350 million or US$2.2 million per MwH, or to the recent contract between Nicaragua and Eletrobras, the Brazilian state-owned utility company, to build a 250 MW hydroelectric power plant in southern Nicaragua, at a cost of US$700 million, or US$2.80 million per MwH. But I won’t because the explanations are right here in Guyana.

In writing on the subject of Amaila Mr. Gopaul can recall what I said about the PPP/C 2011 manifesto but conveniently forgets what has been said and written not by informed critics of Amaila’s exploding cost but by its very own sponsors. Here is what the Champion of the Earth and the opportunist “investor” Fip Motilall told the Hydro World in 2007: “The hydro project is expected to cost US$300 million, with a third of that devoted to building transmission lines to carry power from Guyana’s remote inland to its population centers.” Since the line would be almost the same for 100 or 165 MwH, the explosion in the cost would be mainly the plant.

And if Mr. Gopaul has problems with the Champ and Motilall as so many people do, let me draw his attention to a letter by Raphael Herz and Brian Kubeck of Sithe Global who on February 29, 2012, responding to a letter by Ramon Gaskin in the SN of February 14, 2012 wrote, “Mr Gaskin questions the cost of the Amaila Project, suggesting that a hydropower plant of this size would normally cost between $320 million and $360 million….. In this case, the construction cost of the hydropower facility of the Amaila project is in the range that Mr Gaskin suggests (emphasis added).”

If that does not convince Mr. Gopaul, then I cannot help him. Now for my questions to him:

– Does he consider the model proposed by Motilall/Sithe/Chinese the best technical and financial option to produce an optimal hydroelectricity facility at Amaila?
– Does he know and is he convinced that the technology to be used in Amaila would be state-of-the-art and not like the elephant the Chinese built at Skeldon for GuySuCo?
– Has he seen all the documents on the Amaila Project and if not would he join the call for these to be tabled in the National Assembly?
– Can he say when the final licence for the Amaila Project required under the Hydroelectric Power Act was or will be issued, and similarly for the Power Purchase Agreement between Amaila and GPL?
– Is he aware that Sithe has defended Amaila Project on fuel reaching US$200 per barrel while the current cost is under US$90 per barrel and the 20-year outlook is for reduced demand due to technology and alternatives?
– Would he please provide hard information to contradict the calculation that Amaila will cause the electricity tariff to increase for several years?
– Does he believe that Banks DIH, DDL and all those entities which have disconnected from the national grid will automatically return because of Amaila?
– Does he share the optimism that when Amaila comes on stream that Linden will automatically receive power from the National Grid and pay the national rates?
– Does he know of any public project that is feasible with borrowings at 8.5% and return on investment of 19%?
– Does he know of any government-guaranteed project which carries risk insurance of 12% of the project cost?
– Does he consider as realistic the assumption that GPL will reduce losses from 32% to 20% in six years time?
– Can he share with Guyanese his understanding of how power from Amaila will be distributed to Essequibo and the hinterland communities?
– Can he share with Guyanese his knowledge of how much of its existing plant and current fixed and operating costs GPL will continue to carry when Amaila starts to produce?

If Mr. Gopaul or anyone else would like a debate on Amaila, I respectfully suggest they have relevant and not pseudo-facts. And just in case Mr. Gopaul does not know the answers to my questions, I am sending a copy of this letter to the Prime Minister for his comments and response.

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