…electricity cost to reduce by 40 percent
President Bharrat Jagdeo said that the Guyana Power and Light, the power purchaser for the Amaila Falls Hydro Project, would be able to reduce its electricity tariff by 40 percent when the cheaper, cleaner power by way of the project comes online. This is the first project under Guyana’s Low Carbon Development Strategy and it is being partially financed from forest funds.
Guyana, from this year, will begin to draw down on funding from an agreement with the Government of Norway for the preservation of the forest as a means of mitigating carbon loss, which leads to warmer oceans and change in weather related phenomena. Guyana will see US$250 million of these funds up to 2015, provided stringent benchmarks for monitoring and verification, transparency and financial accountability are met.
The President, speaking yesterday at the launch of the latest draft of the Low Carbon Development Strategy at the Umana Yana, Kingston, explained that the cost for the construction of the facility will be $306m, while the transmission line will cost US$145m. He said that another US$165m has been set aside for interest on the project and is part of a contingency fund.
The investment in the hydro is one of the first pieces of concrete spending in the new low carbon economy, which the country is embarking on as a means of fostering greener development, energy efficiency and savings from fossil fuel purchases, while at the same time combating climate change.
President Jagdeo said that after 20 years of private operation, the project will be handed over to the Government. He explained that since hydro-electric plants of the kind being built have life expectancies of 100 years, Government will have a run of operating the project on a cost-free basis for 80 years.
According to the President, in 2008, the Guyana Power and Light was generating power at a cost of US$0.18 per kilowatt hour. He said that with the coming into being of the hydro, the price that the consumers and businesses pay for power will be stable.
He said that the purchase of equity into the hydro investment will be enumerated at 20 percent in terms of returns. He said that this is higher than loan financing and will as such send down the cost to the consumer and the private sector. The President noted that the entire process for the works related to the hydro was done in an open, public and transparent manner.
The construction of the Amaila Falls Hydro electric plant has long been a priority of successive governments of Guyana. This project, once complete, will provide a transformational change in the competitiveness of Guyanese businesses, eliminate a key barrier to foreign Direct Investment, and enable an unprecedented reduction in the cost for electricity for citizens, while simultaneously enabling Guyana to switch from almost 100 percent dependence on  fossil fuel based electricity generation to nearly 100 percent, clean, renewable energy supplies.
According to a brief from the Office of Climate Change, the 154 megawatt project will cost approximately US$650m, funded by a mixture of debt – approximately 70 percent , and equity – 30 percent. Sithe Global Power LLC and the Government of Guyana are the parties putting up the equity for the construction of the Amaila Hydro. The tentative debt structure includes lead financing by the Inter-American Development Bank and the China Development Bank.
The project footprint on the forest will be less than .001 percent of the State Forest area; and the Environmental Protection Agency, working in partnership with the IDB, will ensure that its development meets both national and international social and environmental safeguard benchmarks.
“An Environmental Impact Assessment (EIA) completed in 2002 and updated in 2008 revealed no existing occupation in the proposed project area. An amended EIA and Environmental and Social Management Plan are being prepared by Sithe Global to cover the final project scope,” the OCC said in its brief.
The project will work closely with local and international Non-Governmental Organisations such as Conservation International to ensure that exacting environmental, social and safety standards are met. Further, emphasis and care will be taken to ensure that neighbouring communities benefit from the project’s construction.
Government will earmark between US$40 – US$60 m in LCDS funds that will be used to buy the Sithe equity and therefore reduce the annual payment to the Amaila Falls Inc. “Under the terms of the project, Government has the right, but not the obligation, to substitute Sithe’s high cost equity with LCDS funds. Once the plant is operational, future Governments may exercise the option to sell the Government’s equity stake to private investors,” the OCC said in its briefing paper.
The project will be executed according to a Build, Own, Operate and Transfer arrangement for which the Guyana Power and Light will purchase 100 percent of the power under a ‘take or pay’ power purchase agreement (PPA), with the private sponsor. The OCC said that completing the hydro project and the transmission line is scheduled to have a 40-month duration, and the Commercial Operation Date tentatively scheduled for the first quarter of 2014. Principal construction of the access road and transmission line right of way is planned to start in July 2010, and to take eight months to complete. The road is to cost US$16m and this is a part of the Government of Guyana’s contribution for the project.