“Shrouded in secrecy”: Norway’s REDD funding for the Amaila Falls dam in Guyana

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The controversy surrounding the proposed Amaila Falls hydropower dam in Guyana continues. Ex-President Bharrat Jagdeo publicly committed to building the dam before he left office. Like many of Jagdeo’s other promises, this came to nothing.

The lead developer of the 165 MW dam is Sithe Global, which is part of the Blackstone Group, a giant New York-based private equity, investment banking, alternative asset management and financial services corporation. In 2009, Sithe Global signed a take-or-pay power purchase agreement, which guarantees a 19% rate of return to Sithe Global. Sithe Global will provide more than US$120 million in equity funding during the construction period. In September 2012, China Railway First Group signed an engineering contract. Most of the money for the US$840 project will come from the China Development Bank. The IDB has been asked to fund US$175 million.

The access road to the construction site has still not been completed. In January 2012, the government sacked Synergy Holdings, the company that won the contract to build the road, after a series of delays and cost overruns. The contract involves constructing 85 kilometres of new road and upgrading 122 kilometres of existing roads. Last week, the Kaieteur Times described the project as “on rocky ground at the moment”, with the access road far from complete and a deadline to meet at the end of this year.

If the road is not completed at the end of the year, Sithe Global and China Railway First Group could invoke penalty clauses resulting in Guyana paying a percentage of the total project sum. The cost of the road construction is already 33% over budget. The government awarded China Railway First Group the contract to finish the access road.

In April 2013, the opposition parties in Guyana blocked funds for a government equity-stake in the Amaila Falls project. One of the opposition parties, the Alliance for Change (AFC) recently said that it would not make a decision on releasing the government funds until the Inter-American Development Bank (IDB) completes its financial due diligence of the project.

The government equity-stake in the project could total US$80 million. The money would come from Norway’s Guyana REDD-Plus Investment Fund (GRIF) – the Amaila Falls project is one of the few projects under Guyana’s Low Carbon Development Strategy.

At full capacity the dam could generate more than Guyana’s current power needs, and after 20 years the ownership of the dam would transfer to the government with the construction costs paid off. But there remain serious questions about the project.

Normally, the IDB sets up an advisory expert panel to help selection of the environment and social impact assessment team and other due diligence activities. In the case of the Amaila Falls project, the IDB’s expert panel only started its work after the environment and social impact assessment team had visited the project area. The IDB expert panel’s report from 2011 has not been made public.

Recently, the Economist listed a series of problems with the project, under the headline “Shrouded in secrecy”:

  • Guyana Power and Light, the state-owned electricity company will end up paying around US$100 per year to the Amaila Falls consortium.
  • Electricity bills in Guyana are unlikely to fall.
  • The Amaila Falls dam may not generate electricity all year round. Between October and April (the dry season in that area of the country) the dam will run at less than capacity. GPL will have to pay for backup power. The El Niño weather pattern can result in a year-long drought.
  • The estimated cost of the dam has increased steadily. The IMF has urged “careful consideration of the [financial] risks”.
  • The financial feasibility study is not yet completed. When it is, it will remain confidential.
  • GPL’s power-purchase agreement is also confidential.

The Economist concludes its article with the observation that,

If Amaila is as beneficial as its backers claim, an open debate might generate broader support for the project, and cut its $56m bill for political risk insurance.

Isn’t REDD supposed to increase transparency? Shouldn’t the involvement of Norwegian money, via the GRIF, mean that Norway is demanding transparency? Apparently not.

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6 Comments

  1. GRIF funds have not been used on the Amaila Falls project. Here’s to hoping if/when they are it will be tied to requirements for increased transparency.

  2. @al perkins (#1) – True, so far GRIF funds have not been used for the Amaila Falls project. However, if you look at the GRIF website, it states that the GRIF project budget for the Amaila Falls project is US$80 million (see the screenshot below, taken today). It makes sense to me to call for transparency now, rather than when the money is transferred.

  3. Would really like some clarifications on this statement.
    Guyana Power and Light, the state-owned electricity company will end up paying around US$100 per year to the Amaila Falls consortium.

  4. @Elton McRae (#3) – Thanks for this comment. The statement comes from the article in the Economist, which states, “Guyana Power and Light (GPL), the state-owned electricity company, will pay about $100m a year to the Amaila consortium.” It presumably comes from the power-purchase agreement that GPL signed – which is confidential. I’ll try to find out from the Economist where they got this figure came from.

  5. The financial feasibility should also have been done prior to even getting into any agreement so that the tax-payers can effectively participate and make the decision whether they would like to enter into such a commitment. This has not happened and now we again, stand to lose more of our hard-earned dollars as a result of shady deals under corrupt leaders and practices. They should be held accountable for abuse of office etc etc

  6. Chris Lang, thanks so much for this article. Very informative. There is so much of secrecy on this matter. All the taxpayers know is that they will be saddled with the BURDEN but the corrupt government is not telling them anything- saying it is confidential.

    This weekend the impotent opposition will get a fly over the Amaila Fall’s project and I won’t hold my breath. They will come back afterthe joy ride and support the economic burden the corrupt gov’t will put will on us.

    Have you heard Commonwealth Secretariat has now made former President Jagdeo the lead man on climate change and economics? If you know Guyana’s history Jagdeo was the MOST corrupt president. Because of him almost half of the economy is controlled by drugs, people’s rights are violated with no regards by the gov’t, the Consolidated Fund is violated every day and the country is one of the most corrupt. The country is a cesspool of stench, with Georgetwown the Garden City now best described at the Garbage City.

    The gov’t has refused to pay the City Council millions of dollars in back taxes and has not held local government elections since 1994.

    Aren’t all these things tied to climate control and finance? Please help us.

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