Dear Editor
On reading two recent articles in the media – (1) Developer steams ahead with smaller windfarm (a report on representations purportedly made by Businessman Lloyd Singh) (2) Minister Patterson sets record straight on Windfarm Project,I have felt a need for a greater grasp by our public of three important matters – (1) the fair price to be paid for the electricity (2) the nature of the lease purportedly held by Businessman Lloyd Singh. (3) preference, now, for going to an open invitation for proposals.

Background: It should be recognized as a matter of credit to the PPP/C that on coming into Office, that once we had stabilized GEC/GPL somewhat, we opened our minds and doors to proposals for ‘renewable energy’ carrying on (in appropriate steps) from where the earlier PNC Administration had progressed this matter. Development of a hydropower generating station at Amaila and a windfarm at Hope Beach, ECD, were high among renewable energy projects advocated and for which interests in development were soon put to us.

At that time, latter 1990s, renewably generated electricity was still, except in particular circumstances, more costly and more challenging to arrange than fossil-fuel generated electricity. To make ‘renewable’ energy projects attractive/competitive then, low prices but acceptable quality, low or zero rate financing and/or grants were often featured by developers with access to such. The circumstances then favoured entering negotiations with seemingly credible and attractive ‘unsolicited’ offers.

Along the way the Government would provide various ‘conditional’ positions and assurances until all was agreed and checked out as far as practical, at which time the various parties would enter into final ‘closing’ commitment documents. Businessman Lloyd Singh is the third-generation principal of a firm making the initial offer, about the late 1990s, then represented by a foreign businessman who had established a successful windfarm in a location of a very favourable wind regime in one of the Dutch West Indian islands.

Our wind regime was found to be marginally attractive and the businessman withdrew, handing the company over to his local representative. It should be known that MOUs are generally good for a period of up to about three years. Often, a good-faith relationship may be continued for some time and a new MOU may be entered into when there are sufficient grounds for so doing. This was the windfarm story until about 2010.

Price For Electricity: It is accurate as Minister Patterson states that the PPP/C, about 2010 in my recall, had offered to pay US 18 cents per kWh in a 5-year BOOT agreement in response to an offer that was extremely attractive – very high equipment manufacturer financing coupled with low capital cost and low interest rates.

As we thought, that offer was too good to be true – it was soon withdrawn and all conditional arrangements, on all sides, would have fallen away. Roughly speaking, the GPL’s offer of US 18 cents per kWh was its then ‘avoided costs’(nearly all of it being fuel costs which was then at about USD 100 per barrel). It was the maximum GPL could pay without negatively impacting its cash flow, and it would have rapidly wrote-off the investment and have ownership of the windfarm transferred to GPL at the end of 5 years, at zero charge.

Roughly speaking, the fair/equivalent price to be paid would be reduced proportionately as the BOOT period lengthened – a bit (but not much) above US 9 cents for a 10-year BOOT, and somewhat above US 6 cents for a 15-year BOOT. Additionally, taking account of the greatly lowered fuel prices these days, each of the above (avoided costs) prices may be reduced further, by about 40%. So, the Honourable Minister Patterson and our public should guard against any straight comparison with an unadjusted, US 18 cents per kwh. A price above GPL’s ‘avoided cost’ profile would be open to questions about a subsidy/transfer to the investor and/or a payment for the government’s/nation’s renewable energy policy.

Nature of Lease Granted: As stated earlier the conditions of the MOU and subsequent agreements along the negotiations, are all conditional until total agreement on all matters is reached. The reported claim of the Businessman Lloyd Singh of having a 50-year lease should be thoroughly checked – there should be clauses in the lease and other related documents, of explicit and/or at a minimum, implicit conditions which were not met.
Open invitation for submission of interests: The Renewable Energy sector is much more mature today with many more participants. As I have stated on earlier occasions, when that very good offer was withdrawn the PPP/C Administration decided to turn to an open invitation.

The Businessman states that no Government investment is required (once the return/interest rates are high enough anything may be possible): experience has been however, that with interest/return rates that are not excessive, the question of a Government guarantee comes up. In many considerations of Governments’ books Government guarantees are treated as expenditures/loans/investments. An open invitation of interests is the way to go now, to encourage/demonstrate/identify fair play on all sides.

Regards
Samuel A. A. HindsFormer Minister Responsible for Electricity and Energy