EXPOSED:  Granger-led gov’t  confirms ‘devotion’ to LCDS programme spearheaded by Jagdeo

• Norway report

The APNU/AFC coalition government has “confirmed its devotion” to the Low Carbon Development Strategy (LCDS), which was the brainchild of former President Dr Bharrat Jagdeo,  who introduced the revolutionary strategy in 2009, the updated version of which was confirmed in 2013.

The “confirmed devotion” by the coalition government was expressed after President David Granger himself criticized the LCDS as being “too narrow” in its conceptualisation.  “We would like to look at Climate Change more broadly,” President Granger had said.

This hypocritical stance by the Granger-led coalition Government was exposed in the final report on the Review of the Amaila falls Hydropower Project in Guyana – a 49-page document  done by the Norwegian company, Norconsult, and which has been made public today.

Following is just the text of the summary of that report:

Since 2009 Norwegian International Climate and Forest Initiative (NICFI) has supported Guyana’s efforts for protecting its rainforest from exploitation and degradation and for changing its currently oil fuelled electricity sector to emission-free power generation.

As reward for Guyana’s endeavours towards these goals, Norway in 2014 deposited US$80 million in the Inter-American Development Bank (IDB) earmarked for Guyana’s equity share in Amaila Falls Hydropower Inc (AFHI),  a Special Purpose Company for realising the 165 MW Amaila Falls Hydropower Project (AFHP) as a public/private partnership BOOT project supported by IDB.

Sithe Global, the private partner and main sponsor in AFHI, withdrew from this position in August 2013 after the Guyanese National Assembly did not vote unanimously in favour of a proposition presented by Sithe Global for certain project features, including raising the ceiling for maximum annual payment by Guyana Power and Light (GPL) as power off-taker.

Thereafter, efforts continued, supported by IDB, to establish a new main sponsor in AFHI. This came to a standstill after a new coalition government created by the earlier opposition parties took power after the parliamentary elections in May 2015.

Former President Dr Bharrat Jagdeo and current President David Granger 

The new government has confirmed its devotion to the Low Carbon Development Strategy (LCDS), which was introduced in 2009 by the former government and confirmed by its updated LCDS declaration in 2013. With the aim of finding a way forward for the transition of Guyana’s power generation system, Government of Guyana represented by the Minister of Finance and the Minister of Natural Resources and the Government of Norway represented by the Minister of Climate and Environment, decided in December 2015 to perform “an objective and facts-based” assessment of AFHP.

On June 20th 2016 NORAD (Norwegian Agency for Development Co-operation), in support of NICFI signed an agreement with Norconsult AS for carrying out an initial analysis. Main conclusions and recommendations are presented below: The only realistic path for Guyana towards an emission free electricity sector is by developing its hydropower potential. The fastest way forward is to maintain AFHP as the first major step for substituting its current oil fired generation.

AFHP was prioritised as the first hydropower plant because it was the only project with a full feasibility study completed, it has a higher plant load factor than the alternatives, a smaller reservoir and a levelised unit cost in the same range as the most attractive alternatives.

Amaila Falls alone cannot provide a 100% emission free power generation in Guyana. Other generating sources will have to be added in parallel like sun, wind and thermal production based on emission neutral fuel (bagasse) for back-up in the dry periods when the water flow to AFHP may be insufficient for full capacity operation.

As the power demand is growing, and for reaching the goal of 100% emission free generation by 2025, as assumed by the LCDS, a second hydropower plant of capacity comparable with AFHP will have to be commissioned by 2025. In parallel with preparations for AFHP, therefore, prefeasibility studies will have to be carried out for promising candidates for the second hydropower project and a full feasibility study be performed for the selected candidate. The environmental and social impacts of AFHP are well established in the performed studies. No resettlement is required and there is limited human activity in the area directly affected by the project. About 23 km2 of rainforest is inundated by the power plant’s reservoir. The live storage volume is small compared to the annual water flow and the plant will be operated mainly as a run-of-river plant with little impact on the downstream river hydrology, except for the about 4 km stretch of the river between the intake dam and the tailrace outlet from the powerhouse. The most serious threat to the environment that may result from the project is the access road, which is almost completed and has already, while the further progress of the project itself is uncertain, created easier access for mining and exploitation of the forest along its alignment. A strict control regime is required for obstructing such activities. It is important to take up again consultations with all affected parties as soon as resuming the project preparations.

Other hydropower plants that could have replaced AFHP as the first hydropower project to be implemented, would require 1-2 years of investigations and studies, including environmental and social impact assessments meeting today’s standards, to reach an updated feasibility study stage comparable to AFHP. The first needed step for revitalising AFHP is decision by the Government to maintain AFHP as the priority project in the transition to a green generation regime, as recommended in the “Initial Study on System Expansion of the Generation & Transmission System” of 2014 and reiterated in “Guyana’s Power Generation System Study” of June 2016, and thereafter to resume the planning of Amaila Falls with political consensus and understanding with all stakeholders. It is our opinion that the BOOT type public private partnership model should be maintained for the project implementation. An internationally well merited investor and operator in the hydropower industry should be invited to take the majority position and the driving seat (main sponsor) in the project company. The main sponsor and the EPC Contractor should not be associated in any way. By restructuring the financial model, the risk for Guyana’s economy can be reduced. The annual payments from GPL may possibly be reduced by 20%, which are significantly lower than the current fuel costs paid by GPL for its oil fuelled generation. The risk to Guyana’s economic stability would be at the same level with other projects generating the same amount of energy, as the investment would be of a similar magnitude. It is our opinion that the EPC tenders from 2008 are outdated and need to be replaced by a new EPC tender process. Before that, certain technical features of the project should be reviewed and the EPC tender documents be updated. In order to save time this work should be done in parallel with identifying and assigning a new main sponsor. To get on with these activities GOG will need continued support by IDB, or a similar institution, and Guyana Light and Power will need technical and management support by a highly qualified engineering company with extensive experience from the international hydropower industry. If later agreed between the parties, the same engineering company may continue in a role as independent engineer in the relation between GOG/GLP and the new main sponsor. We may suggest that the cost for buying out Sithe Global from the project company and expenses for services by an engineering company engaged for support until a new main sponsor is established, are covered from a portion of the US$ 80 million deposit in IDB for later being turned into equity contribution from GOG to the project company. Our estimate is that 3 years will be required from a decision is taken to resume project preparation for AFHP until Financial Close and Notice to Commence to the EPC Contractor.

From this point in time, we estimate another 3.5 years for construction until start commercial operation of Amaila Falls Hydropower Project.