000 in a Bank

micevan1l6

…Sithe Global had planned to pay itself US$60,000 monthly for four years to oversee the construction it designed  Sithe Global, the company contracted to develop the Amaila Falls Hydro Electric Project, has embedded in its agreement with the Guyana Government, its legal fees to be paid and this is included in the overall price tag of US$858M.It was unearthed during an assessment of the project documents, that Sithe Global included its legal fees which amounts to a whopping US$5M.The information is reflected in the Mercados Energeticos Consultores, Evaluation and Financial report for the Amaila Falls Hydro Electric Project.The Argentine Based Company was hired by Sithe Global and the Guyana Government in 2009 to undertake a viability study for the project.Under the cost analysis breakdown of the project, it was pointed out that US$2M out of the US$5M has been set aside for the Bank’s Legal Fees.This allocation raises serious concerns, with observers asking why the company would want to be paying the legal fees, for presumably the Chinese Bank.The China Exim Bank at the time had agreed to lend Amaila Falls Hydro Inc, some US$450M for the project.It is also documented in the breakdown of costs that the remaining US$3M has been earmarked as the ‘Legal Counsel’ fees for the Company.Attorney-at-Law, Nigel Hughes, is the registered Company Secretary for Amaila Falls Hydro Inc.When news broke of Hughes affiliation to the Amaila Falls Hydro Inc, the Alliance for Change (AFC) Leader, Khemraj Ramjattan said that he knew of an association between Hughes and the Company and that it was related to legal services.Construction OversightMeanwhile, it was also unearthed that the Company contracted itself to oversee the construction of the project that it had designed.Sithe Global, who developed the project, demanded that it be paid US$60,000 per month for undertaking this function.With a construction duration time set at four years, this would mean that Sithe Global would have paid itself US$3M for the service.This payment to Sithe Global would be in addition to being reimbursed for the cost the company would actually incur.This questionable transaction that Sithe Global caused the Guyana Government to agree to, is separate from what this publication reported on yesterday regarding the interest payments.Chartered Accountant Christopher Ram in his analysis said,  the repayment arrangement to Sithe Global was akin to depositing $100,000 in a Bank, withdrawing $90,000, but the Bank continues to pay you interest for twenty years on the initial deposit of $100,000According to the financial analyst, this is exactly what the Guyana Government signed onto with Sithe Global for the Hydro Project.He said it was surprising enough to learn that Sithe Global would be receiving a tax-free, 19 per cent return on its investment.He calculated that in the last five years of the project, when Sithe’s investment would have been substantially repaid, it would receive interest on the balance of its investment at rates ranging from 76 per cent in year 16, to 380 per cent in year 20.According to Ram, Sithe Global also insisted on being paid an ‘equity participation fee’ of two per cent of the total project cost, which amounts to more than US$17M.“In effect, from Sithe’s point of view, the higher the cost, the higher the fees it would be paid.”This ‘equity participation fee,’ is separate and distinct from the 19 per cent rate of return already being asked for its equity.