Sithe Global, the U.S.-based company entrusted with building a US$ 840 million hydropower station here is hoping by June to tie up a loan deal with the Inter American Development Bank (IDB)-the last major financier of the project. But the developer has warned that delays in accessing the funds could drive up costs, especially since Western powers are pressuring China to appreciate its currency.
Speaking at a news conference on January 24, Chief Executive Officer of the New York-based company, Bruce Wrobel said the main reason for having the finances se cured by June has to do with the price increases in construction price over the past year due to currency changes.
Chief Executive Officer (CEO) of Sithe Global, Bruce Wrobel
“The Renminbi (RMB), the Chinese currency versus the U.S. dollar. The equipment is coming from China, so any further movements in the currency would result in additional increases in the price. As you know, there is a lot of pressure by the United States and European governments for the Chinese to appreciate their currency further.
So we need to get this financing closed before there is any further currency adjustments,” Wrobel stated.
Sithe Global had raised similar concerns last year regarding the uncertainty over the RMB. According to Wrobel, the China Development Bank is onboard with an investment of US$ 413.2 million and the IDB, which has not yet released funds, is expected to invest US$ 175 million. “The major impediment right now is the decision by the IDB to go ahead and participate and fill out the balance of the financing. The concern on the part of the international lenders is the size and scale of the project relative to the size of the country, and sophistication of the utility,” Wrobel stated.
Asked what will be the fate of the project should the IDB pull out, Wrobel said: “If the international lenders were to pull out from the project, it will be extremely difficult for Sithe Global.” He said commercial banks do not typically get involved with financing of projects like these, hence it requires those multilateral and bilateral finances.
“We are surprised in the past when the World Bank-who typically lends money to projects like these that we have been involved with–pulled out of sup porting the project with financing, so the IDB becomes very critical to this,” Wrobel stated. In addition to the Caribbean Development Bank (CDB), the other major financiers of the project are: China Railway First Group and the Norwegian government under the Low Carbon Development Strategy (LCDS) agreement with Guyana.
The CEO said that once the international financing is secured, there is a good chance of closing financing for the project and be gin construction by June, 2012. With financing intact, Wrobel said four years from now, power will be coming online into the grid. “A successful Amaila Falls project will result in hundreds of millions of dollars of saving to the consumers in Guyana over the period of the project.
This will be the first time we will be involved in something where we have an electrical grid that is 100 per cent dependent upon thermal energy, and in a single project we are going to convert that na tion to 100 per cent renew able energy,” Wrobel said.
The US$ 840 million Amaila Hydropower Project includes a dam, a 165 mega watt power station, and a high voltage transmission line that will interconnect with the Guyana Power and Light Company (GPL) in Linden and Georgetown.
The CEO is of the belief that Guyana’s economy, cost of living and lifestyle will be in jeopardy if the project fails.
Wrobel said that he is very concerned because without the project, Guyana will continue its dependency on producing energy from oil, noting that that the ability of the power industry and commercial consumers to pay ever rising prices is going to be very difficult.
According to the transport minister, the agreement included the provision of a valid performance bond from an acceptable institution to the value of 10 per cent of the contract price on or be fore January 10, 2012 for the period of the execution of remaining works, and the defects liability period.
As of December 2011, the contractor had completed only 40 per cent of the works despite repeated urgings and interventions from the project engineers and the consulting firm to have the project completed. The termination of the contract will result in the government taking certain actions including seizure of all pieces of equipment and other property used by the contractor, seizure of the contractor’s retention sum, the application for liquidated damages at the rate of US$ 10,000 per day from January 1, 2012 to the date of termination and, seizure of the contractors existing performance bond.
The transport minister explained that the absence of a performance bond was compounded by project delays and other setbacks leading to the eventual termination of the contract. “But we cannot have a project continuing without the surety of a performance bond.”
We then went on a hold, and after that, we were sup posed to be given construction notice to proceed. We actually didn’t get construction notice to proceed in October, 2010,” he told reporters at a news conference. Motilall said that when the notice was given to them in October, 2010, the equipment was not suit able for the works to be done.
He noted that he approached government informing them of the situation, and the notice for the commencement of construction was further delayed to January 11, 2011.
