GUYANA: GPL’s customers must pay or all electricity from Amaila – even if unused — Winston Brassington

Winston Brassington

…to also meet shortfall if revenues not enough to pay Chinese Co.

Feb 24, 2022- Kaieteur News – The Guyana Power and Light (GPL) Incorporated and its customers, will, in the event of the power being supplied by the Amaila Falls Hydro Electric Plant (AFHEP) not be utilized by its customers, stand that risk.

Additionally, if for whatever reason the revenue garnered by GPL is insufficient to meet payment obligations under a Power Purchase Agreement—currently being negotiated—then again the power company and its customers are the parties that bear the risk and would have to meet any shortfall in payments to the Chinese contractor sponsor of AFHEP, China Railway First Group.

This much was made pellucid—for those paying attention—during the recently concluded International Energy Conference and Expo 2022, when Winston Brassington, the de facto head of the AFHEP Project, provided delegates with an update.         

Amaila Falls Hydro Electric Plant (AFHEP)

RISKS INVOLVED IN LARGE PROJECTS

He told conference delegates that with any large projects there are risks involved but in the case of AFHEP, “most of the risks are being put to the developer.”

During his presentation, Brassington was aided by a video slide presentation, which for that part of his update, projected a screen outlining in more detail, the expected ‘primary project risks and mitigants.”

Notably, outlined on that slide were the risks being borne by GPL with regard insufficient revenue to meet payment obligations under the PPA, or in the event of the demand for the power being supplied to the national grid from AFHEP is not sufficient.

Brassington in his presentation did not mention this, but in fact sought to outline that Guyana was not bearing any financial risks with that project since it was not investing anything.

This publication reported on Tuesday that in addition to the outlined risks to the power company and its customers, GPL would also be liable if and when the Amaila Falls runs dry.

This since the power company, under the latest iteration of the project has agreed to assume the hydrological risks for the project.

As such, it would mean that GPL would bear the incurred liability whenever the Amaila Falls runs dry or if the 23 square kilometres reservoir is unable to feed the hydro plant.

Hydrological risk is generally seen, as the risk of having insufficient water in the source river or dam to support the expected levels of electricity generation as had been the case in the past with the Amaila Falls which runs dry during the course of the year.

According to Brassington, the new iteration of the 165MW project will be coming in cheaper than its 2012 price tag, when the then project developers—the Blackstone Group—walked away.

At the time, the reported price was pegged in excess of US$1B but, according to Brassington, this time around, the project is earmarked to cost some US$700M.

The financing for the project this time, according to Brassington, will be borne by the contractor – China Railway First Group, and will include the installation of some 270 kilometres of 230 kilo volt transmission lines, which he said would run from the Amaila Falls to the Sophia Substation.

Included in the new project scope, according to Brassington, is the upgrade of the Amaila Falls Access Road, two substations—one in Linden and another in Georgetown.

Insisting that Guyana has not made any other financial commitments to the project, other than to pay for power when it arrives in Georgetown, Brassington said that the Chinese contractor is expected to put in the finances in part from Chinese institutions.

Being pursued under a Build Own Operate Transfer (BOOT) model, Brassington related that the contractor will have to establish a Special Purpose Vehicle (SPV) in which the owner—China Railway—will assume all of the debts and equity and that power will be purchased by the Guyana Power and Light Inc. (GPL).
“GPL will buy all of the power under a PPA,” and the contractor will have to assume the majority of the risks in the project, he said.

According to Brassington, all of those that had submitted proposals with the intention of pursuing the project had been given copies of every bit of information and documentation at the government’s disposal.

These include, according to Brassington, all of the feasibility and other studies undertaken in relation to the project such as hydrology surveys and others.
Under the BOOT arrangement, Brassington said Guyana would, in 20 years’ time, take ownership of the project.

He did, during his presentation, seek to point out that during the three-and-a-half-year period expected for construction, an independent supervision firm would be hired by the administration to ensure the hydroelectric plant is built to specifications. This is in addition to the recruitment of an Operations and Management consultant. With Guyana taking ownership of the project 20 years after commissioning, Brassington noted that the project’s average price measured over that time period would be about 7.7 cents which is largely going towards the repayment of the US$700M financing.

According to Brassington, the project will be funded by China Rail and Chinese institutions. They will own the project and it will be operated under a concession for 20 years.
At the end of the 20 years, he said, it will be handed over to government at no cost and as such “I think this a great project.”

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