September 28, 2016

Cabinet still to approve repurchase of Skeldon Co-Generation Plant

Cabinet is yet to approve the Guyana Sugar Corporation (GuySuCo) repurchasing its co-generation plant from the Guyana Power and Light’s Skeldon Energy Inc (SEI).
GuySuCo Chief Executive Officer (CEO) Paul Bhim told Guyana Times on Tuesday that no move has yet been made in this direction, since Government was still to make a decision.
Government had moved late last year to buy back the assets valued at some US$30 million, which were sold to the newly-formed SEI under the previous People’s Progressive Party/Civic (PPP/C) Government.

An aerial view of the Skeldon sugar factory in Berbice

An aerial view of the Skeldon sugar factory in Berbice

The SEI, said to be owned by GPL and the National Industrial and Commercial Investments Limited (NICIL) and managed by Finnish Corporation Wärtsilä, was said to be created specifically for the transaction. The then PPP/C Cabinet had approved the sale as well as the Power Purchase Agreement (PPA) between GPL and GuySuCo. The sale was said to be an attempt to bail out the cash-strapped and struggling corporation at the time.
Following the A Partnership for National Unity and Alliance For Change (APNU/AFC) ascension to office and with the launch of the Commission of Inquiry into the Sugar Corporation late last year, GuySuCo decided that it needed to take back its PPA and assets.
The power generating assets consist of three Wärtsilä power plants with an installed capacity of 10 megawatts (MW) and a co-generation bagasse plant with an installed capacity of 30MW. Under the PPA, which would have seen GPL purchasing most of the power from the SEI, Wärtsilä was to provide financing for the rehabilitation of the 10MW plant. The SEI Wärtsilä plant is expected to inherit the many benefits of the more than 20-year relationship Wärtsilä has enjoyed with GPL, such as discounts on spare parts, and proven advice as the company currently operates several bagasse and steam generating facilities internationally. “In consideration of the transfer of assets, GuySuCo will be paid a total of US$30 million. Additionally, SEI will supply power to GuySuCo at the same prices that GPL currently pays GuySuCo today,” it was stated.
GPL has been supplying power to Berbice since 2014 to the tune of 12MW; former head of NICIL Winston Brassington had said the newly-commissioned transmission system allowed one interconnected grid between Demerara and Berbice. He had explained that the new arrangement would have reduced the need and risk in power transmission from Georgetown, and may over time allow this trend to be reversed. The projected generation of the combined plants of 40MW by 2016 would have been over 20 per cent of the generating capacity of the entire Demerara-Berbice Interconnected System (DBIS). The SEI was funded with equity financing of US$5 million from NICIL and US$4 million from GPL, along with debt financing of US$21 million from GPL (in the form of a loan), and several local and international financial institutions. The financing would have been repaid via the sale of power under the two PPAs to GPL and GuySuCo. GPL’s financing for the project was as a result of cash flows derived from savings accrued following the drop in international fuel prices.
It is hoped that the power generation of that plant should be increased by 50 per cent by the end of this year, and almost 100 per cent by 2019.
The expected benefits of the restructuring of the Skeldon energy assets included the enhancement of the generating capacity of the Skeldon Wärtsilä and bagasse co-generation power plants; providing GPL and GuySuCo with a stable and reliable source of power generation; relieving GuySuCo of the responsibility to manage the power generation; providing some US$30 million of capital resources to GuySuCo; and securing, stabilising and expanding the power generating capacity.
In order to harness the full capacity of the plant, Government needed to make some investments to increase the transformer capacity so that more power could be distributed.

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