Amaila project economically viable – due diligence report

The government has reported that an early due diligence report on the Amaila Falls project has validated the project as economically profitable and beneficial to Guyana.
In early June, the government consulted and shared with the joint opposition, a number of key Amaila Falls-related project documents and reports. One report, titled “Economic and Financial Evaluation Study: Guyana Amaila Falls Project”, prepared by Mercados Energetics Consultores and commissioned by the government in 2009, found that the Amaila Falls project would provide an economic rate of return of 33 percent to Guyana, reduce the Guyana Power and Light Company’s (GPL) average supply costs and bring structural benefits to GPL.
Financial evaluation
In a release, government said in 2009, it retained Mercados Energeticos Consultores to perform an economic and financial evaluation of the Amaila Falls project. The study, conducted by an expert team of energy sector specialists, sought to evaluate the economic profitability of the Amaila project for GPL and ensure the supply of power would be consistent with GPL’s medium and long-term demand projections.
“While the report’s conclusions date back to 2008 and 2009, the fundamentals of the economic profitability are only more pronounced today in a high-fuel cost environment. The Mercados report evaluated the Amaila project against oil prices of US$75 a barrel. Fuel prices today are significantly higher, translating into an average generation cost for GPL in excess of 19 U.S. cents per kwh. This cost is compared against Amaila Falls which would reduce the cost of generation to 11 U.S. cents, a 40 percent savings over the first 12 years, and falling to 5.6 U.S. cents in the next eight years of the concession, a 71 percent savings to today’s generation costs.”
Structural benefits
The report’s findings which stated that the Amaila project would bring structural benefits to GPL, is the optimal low-cost generation solution and is economically profitable for Guyana, were a key factor in assessing the merits of moving forward with the development of the Amaila transaction, and are only more relevant today than ever, the government said.
Despite numerous consultations with the joint opposition, access and availability of confidential information for many months and incontrovertible facts showing the economic benefits of the Amaila project, A Partnership for National Unity (APNU) still denied the advantages of cheaper and reliable hydropower to the people of Guyana.
Mercados Energéticos Consultores is internationally recognised for its expertise in assisting governments in the design of policies for the energy sector, and in advising companies on how to identify the right strategies to conduct their business successfully.
The company offers consultancy services on market design, regulatory solutions, and the definition and implementation of public policies for the energy sector.
The professional team in Mercados Energéticos Consultores has played a fundamental role in the design and implementation of reforms in the energy sector in Latin American and Caribbean countries.
It has also worked in Africa, Asia, and Europe. Their recommended solutions have been successfully applied in very different social, economic and institutional conditions.