Hydropower could lower GPL tariff
-lead developer
Stabroek News
February 20, 2003
The Amaila Falls Hydro Project can supply clean electricity to the power company at $12.75 per kilowatt hour and even with GPL’s 42% system losses and a generous overhead, consumers can source power at $28.53 per kilowatt hour, cheaper than current prices.
This is the view of Patrick Ketwaru, General Manager of the lead developer of the Amaila project, Synergy Holdings Inc.
GPL’s current energy charges for residential consumers are $31.34 and $34.73 per kilowatt-hour. The firm wanted this increased by $6.79 and $7.53 per kilowatt-hour from February 1st but was temporarily restrained by a court order.
The proposed increases would have carried commercial customers’ energy charge to $55.08 per kilowatt-hour and industrial customers to $48.47 and $45.86 per kilowatt-hour.
While Ketwaru says hydropower could come in under this price and could be up and running in 30 months, he blames GPL for the project’s delay.
He said the developers have been unable to engage the management of GPL “in meaningful negotiations” on a power purchase agreement to allow the US$318M investment to occur.
Ketwaru said there seems to be reluctance on the part of management to engage in negotiations and denied yesterday that it may cost Guyanese more to buy hydropower in the short-run.
John Lynn, head of the GPL management team, in an interview with Stabroek News on Monday said that hydropower requires a massive investment and might result in consumers being asked to pay more for electricity in the initial stages when debt has to be repaid.
Ketwaru said this was not so and said Lynn had a copy of the feasibility study which demonstrates that power can reach consumers cheaper than being currently charged by GPL. Lynn could not be contacted yesterday for further comment.
Ketwaru said Amaila could deliver power to GPL at Sophia at 6.8 US cents per kilowatt-hour. He said even if a factor of 1.73 is applied to this price to take account of GPL’s system losses of 42% and allowing for a generous overhead of 2.5 cents US per kilowatt-hour, power could still be delivered to consumers at 14.2 US cents (6.8 x 1.73 + 2.5). At an exchange rate of $200 to US$1 this works out to $28.53 per kilowatt-hour.
Ketwaru said the overhead of US 2.5 cents was generous but did not cover the massive annual management fee of US$3.6M currently being paid to AC Power to manage the operations. Profit is built into that management fee.
He insists that the forward movement of the hydro-project has been “significantly” hampered by the “sloth” of GPL in entering into a power purchase agreement.
The Amaila Falls Hydro-electric plant on the Kuribrong River in Region 8 is being configured as a 100-megawatt station to be expanded later.
At a 100-megawatt output, the entire Demerara-Berbice interconnected system, Linden and most of Omai Gold Mines Limited’s power would be secured, Ketwaru stated.
The project includes 300 kilometers of double circuit and 230 KV, high voltage transmission lines to bring power from the generating site to the coast.
Ketwaru said Amaila, in which Harza Engineering Company is a backer, has secured commitments for financing for the project but cannot proceed further without a power purchase agreement. Harza has installed over 50,000 megawatts of hydropower around the world including the Guri Dam hydro project in Venezuela. It recently merged with Montgomery Watson Inc. to become one of the largest engineering and consulting organisations in the world.
The Amaila project would be realised by an expected 70% debt financing and a 30% equity injection. Among those interested in equity participation, Ketwaru said, are Leucadia, Scudda, a Latin American engineering company and Harza. For debt financing, the International Finance Corporation (IFC), the World Bank and the Inter-American Development Bank are among those being approached.
The syndicate debt arrangement is expected to carry a 14% annual interest rate while equity carries a return of 20%.
Ketwaru said in the first ten to fifteen years when debt has to be repaid, the cost of power wholesaled to GPL would still be 6.8 US cents per kilowatt-hour.
This is also because the firm expects financial incentives in securing carbon credits from international agencies for reducing greenhouse gas emissions from diesel generating sets. This is in keeping with the Kyoto protocol.
Ketwaru also expects that when the debt of the operations is repaid the cost of hydropower would be significantly less.
“...I...cannot understand GPL’s reluctance to get on board Amaila,” Ketwaru said.
And in a statement issued on Tuesday, Ketwaru said Synergy Holdings, owned by Fip Motilall, a chemical engineer, has entered into final negotiations with the IFC for the sale of carbon credits for the Amaila project. However, this again hinges on the settling of a power purchase agreement between Amaila and GPL.
Burning fuel to generate electricity produces large amounts of carbon dioxide and other greenhouse gases which contribute to global warming.
If Guyana should reduce such emissions, it would secure carbon credits (financial incentives).
Ketwaru sees the project reducing carbon emissions by 500,000 tons per year. (GITANJALI SINGH)
