APNU/AFC Gov­ern­ment con­tin­ues to lie About Amaila Falls

Weekend Mirror - - EDITORIAL -

Gov­ern­ment

claimed that the re­cently-re­leased in­de­pen­dent as­sess­ment of the Amaila Falls Hy­dropower Project vin­di­cated APNU+AFC’s years of ef­fort to de­stroy the project. This claim plunges new depths in this Gov­ern­ment’s dis­re­gard for the truth - in ac­tual fact; the in­de­pen­dent as­sess­ment urges the Gov­ern­ment to re-start AFHP im­me­di­ately.

The PPP calls on all con­cerned Guyanese to read the as­sess­ment for them­selves, and to join with the PPP to put pres­sure on the APNU/AFC Gov­ern­ment to quickly re-start the project.

On Wed­nes­day, the APNU/AFC Gov­ern­ment is­sued a state­ment about the re­cently-re­leased in­de­pen­dent as­sess­ment of the Amaila Falls Hy­dropower Project. The as­sess­ment was car­ried out by the in­ter­na­tion­ally rep­utable con­sul­tancy, Nor­con­sult.

The APNU/ AFC Gov­ern­ment claimed that the Nor­con­sult as­sess­ment jus­ti­fied the Gov­ern­ment’s ef­forts to abandon the Amaila Falls Hy­dropower Project (AFHP). Even by the low stan­dards of APNU/AFC, this plunges new depths in their ut­ter dis­re­gard for the truth, and it clearly shows the Gov­ern­ment’s con­tempt for the peo­ple of this coun­try. Guyanese fam­i­lies and busi­nesses are still pay­ing way too much for dirty, un­re­li­able elec­tric­ity, when they should be on the thresh­old of af­ford­able, clean and re­li­able elec­tric­ity. They de­serve the truth about Amaila Falls.

We set out be­low our re­ac­tion to the Nor­con­sult as­sess­ment - which orig­i­nated from the Leader of the Op­po­si­tion Bhar­rat Jagdeo’s call for a fact-based as­sess­ment of AFHP. How­ever, we also urge all pa­tri­otic Guyanese to read the as­sess­ment and form their own view on what it says. We are con­fi­dent that in­tel­li­gent, in­de­pen­dent-minded Guyanese will see that the as­sess­ment vin­di­cates the project, and sup­ports re-start­ing it im­me­di­ately. Con­trary to what the APNU/AFC Gov­ern­ment has claimed, the Nor­con­sult as­sess­ment ac­tu­ally says: ● “The only re­al­is­tic path for Guyana to­wards an emis­sion free elec­tric­ity sec­tor is by de­liv­er­ing its hy­dropower po­ten­tial” - page 3

● “The new *APNU/AFC+ Gov­ern­ment has con­firmed its de­vo­tion to the Low Car­bon De­vel­op­ment Strat­egy, which was in­tro­duced by the for­mer *PPP/C} Gov­ern­ment in 2009” – page 3

● “We re­gard the sound­ness of AFHP as ev­i­dent and in or­der to fol­low up the in­ten­tions of the LCDS as fast as pos­si­ble, we rec­om­mend the prepa­ra­tions for AFHP to be re­sumed.” – page 38

● “It is our opin­ion that the BOOT type pub­lic-pri­vate part­ner­ship model should be main­tained for the project im­ple­men­ta­tion. An in­ter­na­tion­ally well-mer­ited in­vestor and op­er­a­tor in the hy­dropower in­dus­try should be in­vited to take the ma­jor­ity po­si­tion” – page 4

In short: the as­sess­ment vin­di­cates the PPP po­si­tion that Guyana should de­velop its hy­dropower ca­pac­ity and that AFHP should be the first hy­dropower project to be de­vel­oped.

Cru­cially, it reaf­firms that the BOOT type pub­lic-pri­vate part­ner­ship model - which the then APNU+AFC Op­po­si­tion de­stroyed in Au­gust 2013 - is the right fi­nan­cial struc­ture for AFHP.

Up un­til yes­ter­day, APNU+AFC, first in Op­po­si­tion and then in Gov­ern­ment, claimed that their con­cerns with the project re­lated to the fi­nanc­ing costs which are as­so­ci­ated with this BOOT type of part­ner­ship. They made wild claims about the cost of the project and the re­sult­ing cost of elec­tric­ity, and re­peated the ridicu­lous claim that the project would sad­dle Guyanese with decades of debt. They also claimed that the EPC con­tracts had been awarded through closed, cor­rupt prac­tices.

How­ever, in Wed­nes­day’s state­ment, they did not men­tion these con­cerns at all - be­cause they have been thor­oughly de­bunked by Nor­con­sult. The in­de­pen­dent as­sess­ment says: ● “After com­pet­i­tive bid­ding be­tween five pre-qual­i­fied can­di­dates, AFHI in 2008 se­lected China Rail First Group (CRFG) as EPC Con­trac­tor.” – page 12 ● “Con­struct­ing Amaila Falls would cut elec­tric­ity costs by more than 50% for the en­ergy pro­duced by AFHP, or US$3,3 bil­lion over 20 years” – page 32

In their state­ment, APNU+AFC hid how they are no longer mak­ing claims about the fi­nan­cial model by in­stead claim­ing that there were mis­sion-crit­i­cal en­gi­neer­ing is­sues to be solved. This is not true – the Nor­con­sult re­port sets out some de­sign ar­eas for con­sid­er­a­tion as the project pro­gresses, but also notes that these ar­eas were al­ready be­ing looked at. Nor­con­sult clearly states “Although cer­tain de­sign as­pects of AFHP should be re­viewed and re­vised, we re­gard the sound­ness of AFHP as ev­i­dent and in or­der to fol­low up the in­ten­tions of the LCDS as fast as pos­si­ble, we rec­om­mend the prepa­ra­tion for AFHP be re­sumed” – page 38.

In­stead of fo­cus­ing on these en­gi­neer­ing is­sues, APNU+AFC should have looked at ar­eas where the project’s fi­nanc­ing can be im­proved - the Nor­con­sult as­sess­ment sets out sev­eral sen­si­ble rec­om­men­da­tions which de­serve fur­ther dis­cus­sion and anal­y­sis. The PPP does not agree with all of these rec­om­men­da­tions, but will sup­port any ef­forts go get costs down fur­ther if pos­si­ble. Specif­i­cally, the as­sess­ment sets out sev­eral rec­om­men­da­tions to re­duce costs from c. US$858 mil­lion to US$801 mil­lion – on page 33. These re­duc­tions come from three places:

● US$20 mil­lion of the re­duc­tion re­lates to tak­ing the cost of the ac­cess road out from the project, given that the road is al­ready con­structed. This is a sen­si­ble re­flec­tion of re­al­ity, although it does not mean that US$20 mil­lion has been saved, only that it has been in­vested al­ready.

● Fur­ther re­duc­tions are based on the new pri­vate in­vestor se­cur­ing a re­turn of 17% in­stead of a re­turn of 19% on eq­uity in­vest­ment – the PPP be­lieves this to be sen­si­ble as it is in line with where the PPP ex­pected the fi­nal po­si­tion to be on AFHP back in 2013. It is also in line with global bench­marks for this type of cap­i­tal be­ing in­vested in mar­kets sim­i­lar to Guyana.

● The rest of the re­duc­tions are based on as­sump­tions that some fi­nanc­ing can be achieved at slightly lower in­ter­est rates in the cap­i­tal mar­kets or by in­creas­ing the re­pay­ment pe­riod for some bor­row­ing. The PPP be­lieves that these fi­nanc­ing re­duc­tions are not likely to be achiev­able for Guyana, but sup­ports test­ing the cap­i­tal mar­kets to see if bet­ter rates can be achieved.

There are also sev­eral other ar­eas where the as­sess­ment could en­cour­age dis­cus­sion on im­prov­ing the project. For ex­am­ple, on page 32, the as­sess­ment also states that “the orig­i­nal PPA had a risk al­lo­ca­tion which was not well bal­anced”. We agree with this state­ment, but point out that this risk al­lo­ca­tion was al­ready be­ing im­proved when the project was put at risk by APNU+AFC. Re­gard­less, we be­lieve that an up­dated dis­cus­sion about re­al­is­tic risk al­lo­ca­tion should be tak­ing place as part of ad­vanc­ing the project to­day.

How­ever, it is im­por­tant to re-em­pha­sise that even with the orig­i­nal fi­nanc­ing struc­ture, AFHP would have de­liv­ered more elec­tric­ity for less money than to­day, avoided any pub­lic debt for Guyana, and rein­tro­duced Guyana to the global cap­i­tal mar­kets for the first time in 40 years. Any mar­ginal im­prove­ments that can be achieved now are dwarfed by the losses in­curred by Guyana be­cause of APNU+AFC’s ac­tions since Au­gust 2013.

To try and re­pair the dam­age, Nor­con­sult sets out how AFHP can be op­er­a­tional in six and a half years time – mainly be­cause the orig­i­nal ten­ders date from 2008 and now need to be re-ten­dered.

This is six years too late be­cause AFHP should have been pro­vid­ing af­ford­able, re­li­able, clean en­ergy to Guyanese within the next few months. How­ever, given that the wasted time can­not be re-gained, we must fo­cus on the fu­ture.

The PPP wishes to see AFHP re-start im­me­di­ately, and is will­ing to en­gage in dis­cus­sions on all the rec­om­men­da­tions set out in the Nor­con­sult as­sess­ment. With that in mind, the PPP calls on all Guyanese to join with us in en­sur­ing that the APNU/AFC Gov­ern­ment acts in the in­ter­est of the peo­ple of Guyana, apologises for their re­peated lies about the project and in­stead works to make AFHP a suc­cess. (State­ment is­sued by Of­fice of the Op­po­si­tion Leader)

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