Getting compensation for failed power plant will be ‘tricky’ – Information Minister

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By Carlena Knight

Demanding compensation from China for the inefficient Wadadli Power Plant (WPP) will be “tricky” given Antigua and Barbuda’s amicable relationship with the Asian nation, admitted Information Minister Melford Nicholas yesterday.

It was revealed earlier this week that the controversial facility – plagued by claims since it was first commissioned in 2011 that it was not value for money – has been closed.

Meanwhile, the amount still owed on the plant stands at around EC$70 million, Observer can reveal. Minister of Works Lennox Weston said the figure outstanding as of July 2020 was EC$71,172,774 – more than half of the original loan from a state-owned Chinese bank.

“It is a tricky issue because as you would know the government enjoys a very good bilateral relationship with the People’s Republic of China and this represents a blot, represents a terrible outcome in terms of what should have been an effective developmental support for the infrastructure in the country. It really is a bad situation,” Nicholas told Thursday’s post-Cabinet press briefing.

The plant, which was expected to last for 50 years has been shut down after just nine years, following an assessment done by APUA officials which showed the underperformance of the 30-megawatt plant at Crabbs Peninsula.

Antigua Public Utilities Authority (APUA) Electricity Business Unit Manager Andre Matthias, speaking on the Observer AM show on Tuesday, broke the news saying it was the best economic decision.

Negotiations first began in 2006 for the provision of a 30-megawatt power plant, with Beijing Construction Engineering Group Company Ltd having been selected as the contractors.

A loan for EC$120 million was provided by the People’s Republic of China through the Export-Import Bank of China.

The then Opposition, the Antigua and Barbuda Labour Party, accused the Baldwin Spencer-led administration of acquiring used engines and even called for a commission of inquiry into the matter.

The Chinese-built plant has been plagued by operational challenges since the outset.

In chronicling the lead up to its shutdown, Matthias says the plant, which housed six units, already had rusting before the point of its commissioning in 2011 and was decommissioned five years later.

In 2017, plans for the plant to come on stream were put in place with a $6 million price tag attached to the cost of bringing three of the six units back into use.

Damex Winpower, a company which specialises in power plant maintenance, was contracted and the plant later came back on stream but Matthias said one of the three refurbished units failed recently.

Nicholas continued that the agreement was that the debt would be paid in the value of Chinese yen.

“The original debt was in the tune of $55 million US dollars but the obligation to repay this money was based on settlement in Chinese currency. So, again we were going to be affected by fluctuations with their currency,” he explained. “We would have preferred if any debt obligation we have would have been in US currency which would have protected us from any fluctuations in exchange rates.”

The USD to yen exchange rate has indeed wavered over the last decade. As an example, using Nicholas’ figure of US$55 million, the total amount owed in yen in December 2011 would have been roughly 348 million. That same figure in USD has fluctuated between a low of 333 million yen in January 2014 to a high of 394 million yen in August last year.

Nicholas continued that discussions will need to be held with the Chinese government to figure out the best possible plan going forward.

“I think the most that can happen now is for both parties to have a conversation as to what happens to the outstanding arrears and the debt that has been incurred and whether or not consideration will be given for it to be written off…and whether or not there is a methodology of converting the debt into another form of development but it is not something that is an easy road to tread,” he explained.

“We do not want to necessarily impair that relationship with the government of China and allow this particular issue to impair the relationship but clearly we have not gotten value for money … and so something needs to be done and we will engage them effectively so that we can come to some sort of compromise.”

With the closure of the plant, the question of how the government plans to mitigate that loss in terms of electricity supply has also come to the forefront.

APUA’s struggles to provide sufficient electricity are well documented, with increased power outages and surges in some areas, but with the loss of this plant, that could be further aggravated.

Nicholas responded to that concern saying APUA will be tasked with finding strategic ways to fill the gap.

“Whether or not APUA will seek to get an increased supply from the power purchase partners, it’s going to be a matter for the determination of APUA in short order,” he said.

Nicholas did however reveal that there are plans being put in place in collaboration with the Environment Ministry to increase the usage and supply of renewable energy.

“I know the Ministry of Health and the Environment has been working with the APUA to ensure that there is going to be an increased supply of renewable energy and as these measures come into being then we will take more of the government’s supply off of the national grid, then it will ease the burden of APUA but again it’s a multifaceted equation that I think they will have to deal with,” said Nicholas.

Regarding the commission of inquiry previously called for, Nicholas added that while it was not a main focus it was not being ruled out.

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