Hydro-Electric Power (Amendment) Bill 2013 – Bill No.15/20132685 07 Aug, 2013
HYDRO-ELECTRIC POWER (AMENDMENT) BILL 2013 – Bill No.15/2013
Mr. Greenidge: Mr. Speaker, on listening the Prime Minister I have restrained my natural tendency to get up and ask on exactly what he was speaking. Can I just invite you to the motion before us? They Hydroelectric Power (amendment) Act is what is before us. The Hydroelectric Power (Amendment) Act as per the explanatory note found at the front deals with three sets of things. The Prime Minister has addressed none of those. In fact, he only mentioned the offset in the last 30 seconds of his presentation. It is astonishing.
Let me just remind you Mr. Speaker that the motion itself has nothing whatsoever to do with financing of any project. It has nothing whatsoever to do with how you have had chats with the Brazilians or what happened to Timbuktu or Tumatumari. It has nothing to do with most of the things he has mentioned. [Interruption] If you had spent the time you are trying to heckle me speaking to him he would have addressed the motion before us and I would not be spending time drawing this to your attention. Mr. Speaker, it is an insult. The purpose of this exercise is basically to lay a Bill and a motion that only tangentially have to do with Amaila. You attempt to force the other side to speak to the Bills and to the motion. If I were not here to hear the Prime Minister the preparation of the presentation would have been completely side-tracked that one address a motion and the Prime Minister addresses what seems to him to be a more sexy and interesting area, the dream of Guyanese to have hydro. If that were so important why did you not bring a Bill that captured all those things you are explaining and seek our permission to approve it in its entirety Prime Minister? That is the proper way to proceed.
For all the virtues of Amaila, all the benefits he is outlining for us, we do not have a single document before us which captures those features. And I think it is most unfortunate. The Bill before us is the Bill that needs to be approved not other documents that would have been passed to us which often are not necessarily related to each other. Let me just give you an idea. We are told that we have the document. On the 17th July - the Prime Minister made mention on the 18th - we received a document. That document had the price of the construction of Amaila at US$840 million. On Monday we met with Sithe Global and Blackstone. The price reflected in the document – page 2, I believe - handed to us by Sithe Global was US$858 million. We raised it with them in this very room. How could that happened?
The subsequent meeting they had with others generated an even different level of figures, even higher US$1.054 billion and yet we are being heckled here and told it does not matter you do not have the documents; we have given you all of them before. Which one of the documents we are supposed to have worked with? The responsibility of the Government is to ensure at this point in time when the Bill or the motion is laid before the House that the latest figures with which they work are before us. That is what we make a decision on, the best information available; not the hope that one person would look at one figure, the Prime Minister and the President make claims about another figure and we are not sure where we are going. The Prime Minister has stated categorically that generating cost would come down. At one point, as he did on a previous occasion he and I spoke about this matter, conflated generation cost and the cost to the consumer. They are two different things. [Interruption] You did.
The Prime Minister conflated the two costs. [Interruption] I am not saying you do not know the difference. I am saying that in making the presentation the concepts were conflated. This means as had often happened the public gets the impression that when the Prime Minister says generating cost will come down to 11 cents from 22 cents or wherever it is they assume that the cost to the consumer, the tariff, will come d own by that significant extent. It is not true. And why do I say it is not true? The Prime Minister was with me when we asked the IDB. I asked the IDB without him, I asked the IDB team that came here when they were with him and they could not give an undertaking or guarantee that the price to the consumer would come down. [Interruption] Prime Minister it is not that I do not trust you. I know that the Prime Minister is expert in many things but I have heard the Prime Minister give many pledges in the past and I have had the unhappy experience that many of them which would normally lie within his purview as Prime Minister he was not able to deliver on. Therefore I am not prepared simply to take his word on this. The public should not be simply required to take his word on it. If a major financier at this point in time cannot tell us why is it that the Prime Minister is telling us this? If he is so sure that power is going to be delivered to the consumer at the price that he announces then he should have no difficulty guaranteeing that if he and his colleagues are in office when that happens they will resign.
If you are so sure about it give us that undertaking because nowhere can we find anyone prepared to guarantee that. In fact, Sithe Global itself was not prepared to give such an undertaking. They give the undertaking about the generating cost. When the Minister was asked about it on the radio, I noticed he worded his response very carefully. We are into a very funny game being played here by the Government in relations to the Opposition.
Let me, since he has raised these points about the financing and so forth, speak to them. I will, if it pleases you Mr. Speaker and my Colleagues, turn to this specific issue that he did not address, which is captured in the motion before us. The question is; if the Amaila Hydro-Electric Power Project is worthy of unprecedented action, that does not mean that the figures, or that the cost of the Amaila Hydro-Electric Power Project does not need to be carefully examined. I was struck by an analogy that the Prime Minister attempted to draw. He says that when the question of the total cost of the Amaila Hydro-Electric Power Project is looked at, one needs to use the analogy of credit borrowing in order to finance something. I believe I am right, I made a note of it; hire purchase or what have you.
Let me tell you something Prime Minister, maybe you have not had the experience that whether you borrow or utilise your own resources, you have a responsibility, especially if you are managing other people’s money, to ensure that the expenditure is as little as necessary. In other words, one does not pay more than the activity warrants. That is the issue with the Amaila Hydro-Electric Power Project; whether in fact a package has been put together that is as cheap as it should be. That is the issue.
Prime Minister you said that when you came to speak to or to speak with, when you arrive at the agreement with Sithe Global, it was in 2006, the price has itself accelerated or appreciated substantially since that time and this is part of the problem. All the elements contributing to that increase do not have to do with fuel prices which we cited. They have to do with the manner in which the package has been put together, the various cost elements in there, including - since Prime Minister you took the trouble of mentioning him - the fees to be paid to one Mr. Motilall. That as well as any inefficiencies, all will go, in the end, on to the cost of the project on either the tariff that the consumer will have to pay or the additional subsides which you will be forced to pay in the event that the consumers refuse to accept prices that you say would not increase. Taxpayers’ moneys will have to be found to pay that subsidy. That is the reality; it is not a question of not understanding the concept.
There is, I think, a responsibility of every Government, whether you are building a Parliament Building, an National Insurance Scheme (N.I.S.) building on the Corentyne or a wharf on the Essequibo, to ensure that it is done efficiently, so that the burden that the taxpayer carries is as low as necessary. That is the issue. It has nothing to do with whether we know about hire purchase or any other forms of credit.
The other observation is that Prime Minister you mentioned the issue of size and you seem to have taken great pleasure, both on now this occasion and the previous occasion, in which you addressed it in this House, in mentioning that I had said that the project should be 200 megawatts. I said nothing of the sort Mr. Prime Minister. I said nothing of the sort Hon. Member Mr. Ganga Persaud, either. [Interruption] The issue of 200 arose because of an exchange between the Prime Minister and me in 2011, in which he took the trouble, I could not afford it, of a full page advertisement to respond to a comment I made about pursuing the Brazilian offer. At that time my understanding from the Prime Minister, which was published in the newspaper in 2009, was that the size of the project was meant to be 700 megawatts, of which the Brazilian would take 500 megawatts and 200 megawatts would be available to us. That was the context in which the figure arose.
Let me go on to say that at the meeting with the Prime Minister and the IDB, the Prime Minister and Dr. Ashni Singh, themselves, drew to the attention of the meeting, and I think the IDB concurred, that within three to five years, the amount of power generated by the Amaila Hydro-Electric Power Project will not be sufficient to meet the normal needs of consumers in Guyana. Why on earth, in those circumstances, would the Prime Minister be telling persons that I said it would not be adequate? I was merely repeating the information which the Prime Minister brought to our attention. I believe our Colleagues from the AFC was there as well.
Whilst I am flattered that you should take the trouble to mention my name so often, I think that I am really not appreciative of the attempt to use this illegitimate tool to win an argument. I am not going to say more on that.
As regards the question of size, my point is that if one remembers, the initial logic behind going to the very large projects, which the Prime Minister himself explained a minute ago, was that they were likely to generate lower per-capita output across because their economies are still associated with it. Therefore, that is attraction of the bigger projects.
Insofar as going to smaller projects are concerned, if there are ruled out by virtue of inability to find a financier, then in going to the smaller projects, one has to bear in mind that they will still have the infrastructural burden. In other words, instead of having 600 megawatts or 700 megawatts plant on one set of transmission lines that cost $100 and something million dollars, one tries to ensure that they have a set of smaller projects. The idea was to develop three or four projects on the same river basin. There is logic behind it.
Therefore, what I have always been saying is that if indeed the intent is to follow that logic and I believe the engineers recommended it and the economics recommends it also, then we should know what it is that the Government plans. The burden of carrying all the transmission lines on Amaila is part of the problem of why it appears to be so costly.
That is an argument, I think the Prime Minister ought to have been able – I means he knows it, I am sure I would not have to persuade him of that and therefore he need not have gone beyond that to be citing me for things I did not actually say.
The question – let me touch on it, perhaps not in any structured sequence; he also raised the question of self generators. Those are private companies that are currently generating and painting to us a very rosy picture of how they would be happy to come on board and buy power. If that is the case, then I am sure they would be happy to know that you will not be using the so called incentives to encourage them to abandon their generators and join the grid.
So of those very businesses have invested for two reasons in generators – one, has to do with the expensiveness of the power delivered to them and the other has to do with the unreliability to the extent if the hydro works as it should, they will have a more reliable power assuming that the figures and the measurement of the flow of the river is accurate. They are not actually measuring the river itself that the hydro is to be built on but nearby ones. It is not quite the same thing. We recognise that there are disparities in the height and the flow.
The very private sector representatives are concerned about being forced onto a system that may yet have movements of power generated that will leave them at times without sufficient power. Those are the questions one has to address, not the ones are worried about as regards whether I said A or B. The point is that those who have already invested in generating plants are concerned that Prime Minister you are not going to turn the investments which they have in generating plants into ashes. In other words, they have now to buy the same services that they have invested substantial amounts in acquiring in the first place. Those are some of the issues.
The Prime Minister made reference to the question of the financing package and explained that there was the IDB via Norwegians or Norwegians via the IDB, the CDB, and so forth. These are the two main elements of input, by way of loans. Then there is the Government and its $100 million of its equity, perhaps something like that and Sithe Global with $150 million.
Prime Minister, quite rightly have said that some of the comments in terms of the equity share may not be - perhaps may have been made; perhaps not in full knowledge or without full cognisance of the nature of the package itself. In the end what matters is the way that the package is structured.
Let us work with $840 million for the moment. If the total cost of $840 million is had and have so structured the package that $250 million of that constitutes equity and one can only fine $100 million for equity. Having organised or orchestrated $840 or $850 million in terms of the capital, one ends up with an equity share in the company of only 40%. That is really what persons are concerned about and whether one should not have looked at a different leveraging – the equity element could not have been different.
Perhaps more worrying than the equity element is that in the end – well it depends on how one looks at it – in the end the participation of the Government in or on the board of directors actually does not even reflect that equity share. I hope I am wrong. I understand that the proposal is that they may end up – that is Sithe Global – with a board representative and certainly management of the company that in fact is operationally far in excess of that. That is the other dimension that needs to be addressed.
Mr. Speaker, I really do not know, we can spend the evening - because this is a massive project – for hours talking about various aspects of the financing, even bits on the engineering side. But the critical issue I believe for most people, is in the end, whether the packaging is done is such a way that the company - Guyana Power and Light Company (GPL) in the end, will be able to deliver tariffs to the consumers at a level significantly below those that currently exists. That case has not been proven by the Government.
Let me tell you the other dimension that has been raised and has not been answered. We ask the IDB why it was that they believed ... Well let me say the understanding is, let us assume that Sithe Global does its work in terms of delivering the power to the terminals to which it has agreed to deliver the power. But, we know of course that the power then has to be received by GPL. The traverse of GPL was only partially mentioned by the Prime Minister when tells us that GPL’s losses which he refused to call inefficiency, when he said that GPL’s losses were occurring because we did not have the money to invest in the equipment. [Interruption] [Mr. Hinds: Inaudible] Yes Prime Minister, you can add all those bits, I have no difficulty with that. Whatever it is you say he said; he said GPL also did not have the money to have the equipment that would reduce the losses; the technical losses at any rate.
Let me just ask, as I asked the IDB. In the last five years, the IDB gave GPL US$10 million to reduce technical losses. The Prime Minister looks disbelieving. I refer him to a document, which was made available to us on July 17th – Development and Expansion Programme 2013-2017 - which very early on makes reference to this, so I am not making up a figure, it is right here. In that very document, it also bemoans the fact that over that period, GPL was only able to reduce the losses by 9%. In fact, in the last two years the reduction has slowed down. I am not going to put any figure to it, but it has slowed down considerably. This is the explanation here.
The question is this; if the IDB, in working very closely with the Government, I am sure it has been over five years because this is not the first loan they would have received, if in that time and the close relationship the IDB has with the Government, it was unable to significantly reduce the technical losses, let alone the commercial losses, which I have not addressed, with US$10 million, why do we believe that by virtue of simply having hydro, they are going to bring those losses down by any significant extent? What is it that the IDB and the Government are going to do in order to bring down the losses?
The document says that they will get an additional $5 million. Ten million dollars could not bring it down significantly, apparently $5 million will. The point is really not the money that is spent, what exactly are they going to do? GPL remains, one of the most inefficient corporations in this country – absolutely. I refuse to countenance any refusal of you to deny that Prime Minister. The idea that it is other than inefficient can only perhaps be added to by also drawing attention to a variety of corrupt practices that take place in the corporation, extensively. Disconnection teams are followed by reconnection teams, in short rift and only set of them are formally paid by GPL. GPL board members have in the past, at least one at any rate, whilst berating the public for not paying and for illegally connecting to the grid; they have given themselves free electricity.
It is those practices that demoralise the public and makes it difficult for GPL to reduce the commercial losses. The extent to which that has generated hostility in the streets is clearly indicated by the murder of the GPL’s Chief Security who went to enforce reconnections in one area in Georgetown. He got shot and killed... [Mr. Hinds: Inaudible.] ...Thank you Prime Minister. It did not take place in a vacuum. I am saying it takes place in a context. I never mentioned justification and my language and I think, certainly my capacity in English is good enough for me to speak for myself. I do not need assistance from Ms. Teixeira.
As regards the documents – the presentations – by the Prime Minister, tools, analysis and description cannot be willy nilly transferred from one context to another. Prime Minister you keep the description that our colleagues have crafted for you and I will find one for myself.
Mr. Speaker, if you look at the document before us that is entitled – “The Hydro-Electric Power (Amendment) Bill No.15/2013, you will find that a lot of the things that we will like to see explained are not there at all. That is why the Prime Minister needs to understand that just giving his word and merely giving us an off-the-cuff analysis with a lot of analogies or some analogies that certainly befuddles me, is not going to be sufficient to deal or quill the criticisms and concerns out there. Prime Minister you have a document which has been examined for example and none of the points you raised would deal with, for example, the concerns that have been raised in recent times.
Professor Thomas, a distinguished Professor in this country and one of the Regions’ most outstanding economist, renowned globally, a former colleague at the University of Guyana calls Amaila one of a number of troubled public projects. In describing it in that way, he listed the following characteristics. He said:
“On the one hand their intrinsic economic wisdom, development, potential and transformative value is doubtful, especially when compared to their objectification.”
Pardon the language, but it is not mine, it is CY’s.
“....their objectification of fraud, waste, corruption, inefficiency and mismanagement that some argue characterise Government’s investment spending and worst provide evidence of the wider social, political and cultural pathologies which besets Guyana today.”
That is just in the preface of a document produced in July of 2013. I am saying to you Prime Minister that there are serious issues to be addressed and if they are to be treated equally seriously, one have to set out, in a manner to enables this House, to compare and contrast what was said and to undertake the analysis of what you said, so that the issues raised by other commentators can be examined seriously.
There is in the presentation of the Prime Minister and in this document which is called a hydro, it is a misnomer, no description of the companies to which the Prime Minister made reference of the reason, or what they were going to do about composition of the Board. There is no description of the power purchasing agreement itself; it is not in there. One does not have to have the entire agreement in the document, but at least it is an important element of what is to happen. The formula for arriving at the tariff – nothing; the commitment to a reduction in tariff – nothing in here; nothing about electricity in fact, as I said; nothing on how the construction contract came to be awarded; how it is that we settled. On what is the outside of Guyana, we have spoken about being small. Therefore, the per capita generation cost will be relatively high. But why the cost of this hydro compared to all the current hydro going on stream in the planning future, is the highest certainly of the ones I have seen and I have not seen anyone argue otherwise. Why it is that this arrangement is called a build, operate and transfer what appears to be a normal booth arrangement, when it has some features that do not properly belong there.
We have not been told how it is the Government is so certain, as to where the tariff will arrive when the major financier is not prepared to give that undertaking. It is not surprising because both the Government and the IDB agreed that at this point in time neither the full economic feasibility study or the due diligence exercised, that the IDB itself has commissioned, are yet completed.
In the absence of those it is rather heroic for the Prime Minister and his colleagues to be giving commitment about reductions in tariff that seem to range from 25% -30%.
These are some of the issues. The Prime Minister looked puzzled when I told him that subsequent to the company telling us the cost of the exercise was to be $850 million - $858 million - that they had added elements and at least our associates gave us a figure of $1.054 billion. The design, which the company told us in here, was not... what was the term or the adjective they used? Was not exactly finished, something like that. That the design was not absolutely finished; that the exact location was not itself determined. All of these things will affect the final cost, so I am a little surprised that the Prime Minister should look so disbelieving when I mentioned that the figure given to us was higher than that which they gave us when they met with us in this very room.
If the final cost of the project have not itself been set then it is not surprising that the other partners are reluctant to embrace these dramatic decreases that the Minister has spoken about.
Let me again come back to the fact that the document, whilst carrying the name of hydro project, is of such limited scope. I mentioned it earlier, maybe you were not here earlier maybe you were still chatting to the Prime Minister. The Hydro-Electric Power (Amendment) Bill 2013, Bill No. 15/2013, this is what we are discussing, although the Prime Minister did not address any of the elements in it. Let me say to you that one has to ask oneself why would the Government, through the Prime Minister, present us with a Bill about a hydro project, which Bill does not address the central features. Well he has spoken about it, but I am saying it was not good enough.
The question is this; we are seeing a device or a continuation of a device or bypassing the Assembly for purposes of detailed discussions of expenditures of a massive size. It is the same arrangements with Marriot Hotel. I suppose if the IDB had not required the Government to pass legislation for the guarantee or to pass legislation for the offset agreement, this project would have suffered exactly the same faith as the Marriot Hotel. They would have gone ahead with it without consulting us. We would have heard about it somewhere down the line. That can be the only conclusion for naming a Bill, a hydro amendment Bill which Bill does not really address anything central to the hydro project, but simply one of the requirements of the financing agency. I do not think that is good enough.
Mr. Speaker, when the Prime Minister calls upon us to, if you like, resurrect, his attorney was using our nationalism, our consciousness or whatever. He must bear that in mind that if one wants to have a fruitful setting in which the exchanges of the type that he seeks can be fruitful, then one also have to deliver what they have to deliver in good faith.
The dialogue itself has to take place in as fulsome a matter as possible let me take the opportunity to say to you, colleagues, that as a number of Ministers have said in the past, it is true that on a number of occasions certainly the APNU, and the APNU together with the AFC, met with the Government and I want to state categorically that we on the APNU said have never given the Government any commitment, contrary to what one of our Members here said, that we would support the project as it stands. We have never done it and, again, it is wrong to misrepresent that position in order simply to sell the project.
Whilst we are on the specifics of the Bill before us, Bill No. 15, let me say to you that one of the controversies that the Prime Minister perhaps did not address has to do with, or one of the elements of the cost that is not included in the $1.054 billion has to do with the very offset, which is what this document is about. I do recall that in the meetings with the IDB and the meeting with the IDB, actually in the meeting prior to that also, they did indicate to us that even at this point in time the exact cost in terms of the offset arrangement could not be specified because they could not say right now that all the requirements, as they called it, associated with the Executive Board, Palosi Amendment was the specific one that they mentioned, have not yet been determined. If there are such additional requirements... Lest my colleagues think that I am being melodramatic here let us remind you, we got the Bill in June, the last time we met when that Bill was presented to us on 18th July there amendments to the Bill and those amendments were significant in number relative to the original document. As regards the bank, therefore, my understanding from what they said to us was that there was the possibility if not a likelihood that there may be additional requirements which may mean additional cost. I just want that to be borne in mind when we discuss or when we think in terms of the costs that have been submitted to us by the Government.
In terms of the document, itself, let me say that the Bill speaks to the insertion of a section or a subsection to prevent what I regard as the economic and even the occasional economic use of the area to be called the offset area. That is one. What, perhaps, I should draw attention here to is that infringement for the rules for the offset seemed to attract fines that are quite substantial. If I remember correctly I see fines that may be as much as GYD$10 million. I think, in the preface, the writer makes reference or an explanation to the fact that this was economically insignificant. Now it may be if it was a firm that was breaking the rules but bear in mind that this offset area is in an area that is populated by indigenous peoples so I do not know whether I am reading correctly as my interpretation is if three or four indigenous people move to hunt or to enclose some area they could be liable to a fine to a maximum of $10 million. I think that sounds to me to be somewhat Draconian and would have some serious implications for the administration of justice apart from the fact that at least one researcher has suggested that the claim in the Government documents that there would be no adverse effects on the indigenous population in the area has been challenged. I just want the Prime Minister to know that. There has been no mention of that but that is an issue. The question is whether the regime itself allows for enough flexibility, for example, in the event that one wants to make an alternative offset or to compensate for an area that one may find suddenly is rich in a mineral but one has set it off as wetland or something like that. I do not see in here that the crafting is flexible enough for us to deal with that in a way that I think all reasonable people would regard as appropriate or flexible. That is the other dimension I would like to touch on.
The other set of observations I would want to make is that the project itself may or may not in the end work out in the manner that the Government wishes. The Government has an obligation and up to now it still has an obligation to put before us by way of a document which is to be specifically approved, a document which captures and addresses their goals and objectives in relation to the project as well as dealing with some of those issues. This is the largest project a Government in Guyana would have ever undertaken in terms of the size of the investment. I just want to remind my colleagues that the last largest investment that the Government had undertaken still remains a ‘white elephant’ five years after construction and shortly after that they built a packaging plant. When the newspaper complained that the packaging plant was not working our ministerial colleague, who is not here at the moment, explained that it is not true that it was not working but that it was only working at 1/3 of capacity. Now in economics that is a very serious indictment and what I am saying is whilst our colleagues on the other side would like us to trust them so if they say that it would work here, it will work there, we ought to trust them without question. There is historical experience to draw on and you have a responsibility to do more than simply ask us to trust you. You need to ensure that the ‘I’s are dotted and the ‘T’s are crossed and going about trying to persuade us to approve the project in this particular way, which I believe is by the back door, rather than giving us a project document which we can then specifically approve, you bring something which is from a donor which we approve in isolation, in its own right, is not good enough and in those circumstances the APNU is not in a position to lend the support that the Prime Minister seeks for this project. I want to say to you that we have indicated in the past that we were not satisfied with the answers, especially as regards the tariff to the consumer on this matter and that has always been the biggest area of concern, certainly, to us. As regards the manner of presentation now I think that that compounds the problem in many ways. I will take the opportunity, Mr. Speaker, to say to you that I notice your enthusiasm to get this Bill considered and to get it through...
...I think that we are all equally enthused by the prospect of hydro but it cannot be any old hydro. If somebody chooses to solve my problems which I am having today by offering me a car then I cannot accept any old car or any old vehicle. The economics of it matters. The economics of the project matters and that is what the Government has to get right and when I hear Sithe Global telling us that there must be consensus in the National Assembly on the part of the Parties I hope that the Government also listened to that because I assume that Sithe is a serious company and that they would have done what was necessary before coming to this Parliament rather than try to blackmail us or to railroad us, to use a kinder term, into approving a project over which we have a lot concerns and a lot of questions. This could have and should have been dealt with difference and it is a testimony to the disregard for dialogue and consensual decision making for joint project goals, if you like, that the Government has. You cannot expect blind following in this manner in a political arena if you behave in that way. I hope that the other things that the Government is proposing to have us support will not be handled in the same way. I thank you, Mr. Speaker. [Applause]
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