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THERE will be no taxpayer bailout of Amaila Falls Hydro Inc. (AFHI), and the debt taken on by AFHI to finance construction of the US$858 million-facility will be repaid by that entity and not the State of Guyana, Sithe Global insists. They pointed out that AFHI is 60 percent owned by Sithe Global, with a minority stake being held by the Government of Guyana.
Speaking yesterday at a stakeholders’ forum at the Guyana International Conference Centre, a triumvirate of the power developer’s top officials sought to explain that AFHI is a privately-owned company and its assets and liabilities are separate from those of the Republic of Guyana.
The trip to Guyana, by Sithe Global’s President Brian Kubeck, its Senior Vice President Justin Schwartz and Senior Managing Director of parent company Blackstone Group Sean Klimczak, comes in the wake of major setbacks befalling the project in the legislature.
“Rate payments not taxpayer dollars”
When quizzed by the Guyana Chronicle, Technical Project Team Leader, Mr. Winston Brassington, who also addressed the forum, posited that “the debt of AFHI does not show up on the books of the Government of Guyana.” Seventy percent of the project will be financed by loans to AFHI from the Inter-American Development Bank (IDB) and the China Development Bank (CDB).
Meanwhile, in response to questions posed by this newspaper, Kubeck and his colleagues explained that AFHI is producing electricity which it sells to the Guyana Power and Light (GPL) Inc. GPL, in turn, sells this electricity to firms and households.
According to them, AFHI will repay its debt using the revenue it earns from selling the electricity it produces. This revenue, they explain, is derived from the tariffs consumers pay for their electricity and not from tax dollars remitted by citizens.
Electricity tariffs are expected to be 20 percent lower immediately when the Amaila Falls Hydropower facility becomes operational, with consumers forecast to save $ 23 billion in the first year it comes online, the project’s representatives added.
GPL
Addressing the guarantee extended by the Government of Guyana, the Sithe officials stressed that the administration has not agreed to pay back the debt owed by AFHI. Rather, they said the administration has committed to ensuring that GPL makes good on its payment for the electricity it purchases from AFHI.
Brassington had earlier pointed out that the developers sought such a guarantee given GPL’s track record of poor financial performance. He added that only the Government of Guyana could provide such a guarantee, since it is the sole shareholder in that company.
It is only when GPL cannot honour its financial commitments to AFHI that the Government of Guyana must pick up GPL’s tab, project officials reiterate.
However, observers point out that because GPL has yet to deal with pervasive electricity theft and continuous line losses, government has repeatedly had to pump resources into the company to help it cover its operating expenses and it is this that has led to the “bailout” fears.
However, Brassington pointed out that a corporate development plan has been designed for GPL. According to him, overall technical and commercial losses are now targeted at 24 percent in 2017. He added that this target takes into account an IDB-funded pilot programme which will determine the level of capital funding needed for the GPL upgrade.
Timeline
Klimczak, striking a note of urgency, noted that there is a narrow timeline for the project to reach financial closure. He said that October 30 of this year is a “drop-dead date”, since the
“IDB [is] scheduled to present [the] project for board approval on October 30, 2013 [and] missing this board date would prevent the achievement of financial close within the EPC [engineering, procurement and construction] price validity period.”
According to him, after December 31 this year, the EPC costs, agreed to by AFHI and the contractor, China Railway Engineering Corporation, will rise.
The Blackstone official is also urging legislators to pass the two pieces of Amaila-related legislation, since the “IDB will not approve the Project without the relevant Parliamentary approvals.” Recently, the National Assembly voted down a bill that would have empowered the country’s President to set aside forest reserves to offset the environmental impact of the project, as well as a public corporation loan guarantee bill which would have enabled the government to guarantee GPL’s payments to AFHI.
Speaking yesterday at a stakeholders’ forum at the Guyana International Conference Centre, a triumvirate of the power developer’s top officials sought to explain that AFHI is a privately-owned company and its assets and liabilities are separate from those of the Republic of Guyana.
The trip to Guyana, by Sithe Global’s President Brian Kubeck, its Senior Vice President Justin Schwartz and Senior Managing Director of parent company Blackstone Group Sean Klimczak, comes in the wake of major setbacks befalling the project in the legislature.
“Rate payments not taxpayer dollars”
When quizzed by the Guyana Chronicle, Technical Project Team Leader, Mr. Winston Brassington, who also addressed the forum, posited that “the debt of AFHI does not show up on the books of the Government of Guyana.” Seventy percent of the project will be financed by loans to AFHI from the Inter-American Development Bank (IDB) and the China Development Bank (CDB).
Meanwhile, in response to questions posed by this newspaper, Kubeck and his colleagues explained that AFHI is producing electricity which it sells to the Guyana Power and Light (GPL) Inc. GPL, in turn, sells this electricity to firms and households.
According to them, AFHI will repay its debt using the revenue it earns from selling the electricity it produces. This revenue, they explain, is derived from the tariffs consumers pay for their electricity and not from tax dollars remitted by citizens.
Electricity tariffs are expected to be 20 percent lower immediately when the Amaila Falls Hydropower facility becomes operational, with consumers forecast to save $ 23 billion in the first year it comes online, the project’s representatives added.
GPL
Addressing the guarantee extended by the Government of Guyana, the Sithe officials stressed that the administration has not agreed to pay back the debt owed by AFHI. Rather, they said the administration has committed to ensuring that GPL makes good on its payment for the electricity it purchases from AFHI.
Brassington had earlier pointed out that the developers sought such a guarantee given GPL’s track record of poor financial performance. He added that only the Government of Guyana could provide such a guarantee, since it is the sole shareholder in that company.
It is only when GPL cannot honour its financial commitments to AFHI that the Government of Guyana must pick up GPL’s tab, project officials reiterate.
However, observers point out that because GPL has yet to deal with pervasive electricity theft and continuous line losses, government has repeatedly had to pump resources into the company to help it cover its operating expenses and it is this that has led to the “bailout” fears.
However, Brassington pointed out that a corporate development plan has been designed for GPL. According to him, overall technical and commercial losses are now targeted at 24 percent in 2017. He added that this target takes into account an IDB-funded pilot programme which will determine the level of capital funding needed for the GPL upgrade.
Timeline
Klimczak, striking a note of urgency, noted that there is a narrow timeline for the project to reach financial closure. He said that October 30 of this year is a “drop-dead date”, since the
“IDB [is] scheduled to present [the] project for board approval on October 30, 2013 [and] missing this board date would prevent the achievement of financial close within the EPC [engineering, procurement and construction] price validity period.”
According to him, after December 31 this year, the EPC costs, agreed to by AFHI and the contractor, China Railway Engineering Corporation, will rise.
The Blackstone official is also urging legislators to pass the two pieces of Amaila-related legislation, since the “IDB will not approve the Project without the relevant Parliamentary approvals.” Recently, the National Assembly voted down a bill that would have empowered the country’s President to set aside forest reserves to offset the environmental impact of the project, as well as a public corporation loan guarantee bill which would have enabled the government to guarantee GPL’s payments to AFHI.
