In a letter responding to the article on Synergy's claims on page eight of yesterday's Chronicle, Lynn said: "GPL is entirely in favour of using hydro and other renewable sources of energy provided that the projects result in stable, ideally lower, electricity charges and contribute to improving supply reliability. GPL believes that in such situation GPL's customers and shareholders will both benefit."

He said GPL has taken a prudent approach to assessing the Synergy proposal because an incorrect decision could result in either or both, higher prices or lower reliability.

The Synergy proposal, he said, has been assessed by experts not associated in any way with GPL and they concluded in mid-2002 that additional work would be required by the promoters in the following areas, among others:

- Data provided by Synergy on the availability of water through the year at the location of the proposed station is inadequate. This will determine if the proposed station can deliver reliably throughout the year.

- Capital and operating costs may be significantly underestimated.

- The market available to take the electricity to be generated may be overestimated.

- Significant technical issues remain to be resolved.

- There will be a revenue shortfall in the earlier years that needed to be funded from some source. This may have to come from Government.

- There was a lack of clarity regarding financial backing for the project.

He contended that a separate study undertaken by a different consultant not connected with GPL concluded last September that a more realistic analysis is required for the project.

"A further study undertaken by a consultant with no association with GPL concluded in December 2001 that medium to long-term electricity costs in Guyana would be more expensive with the proposed hydro proposal than with a continuation of existing generating types. (This was before the recent higher oil prices but also before the other report that suggested that the hydro project costs may be underestimated.) The first study mentioned above came to a different conclusion. This difference of view illustrates some of the uncertainty associated with evaluating such a project," Lynn said

"GPL is in favour of using 'green' source of power subject to the conditions stated earlier. The information provided in this letter has been available to all interested parties for some time - including Synergy.

"The studies have vindicated GPL's approach to date. The promoters must not gloss over the studies' results," Lynn argued.

He said it does no service to the Guyanese electricity customer for anyone to present a one-sided selective representation of the issues, adding that building a hydro station of the size proposed in Guyana will be a massive undertaking. It will commit the country to support repayment in foreign currency of capital, interest and dividends arising from an initial capital expenditure about US$250M, he said.

Lynn noted that it was suggested by Synergy that GPL was acting with sloth or reluctance.

"GPL rejects this assertion but readily concedes that we have been and are behaving prudently about such an undertaking. This is not just about GPL giving commitments, it is about GPL making binding promises (signing a Power Purchase Agreement) on behalf of electricity customers that the customers will repay the charges necessary to ensure that the project promoters can repay US$350M plus associated interest and dividends".

He further argued that this is not a decision that can or should be made lightly. A Power Purchase Agreement potentially shifts some of the risk from the project promoters to GPL and its customers.

If the project promoters are as confident as they seem about the project economics, financial benefits and technical aspects, then they will ultimately be able to tolerate less onerous terms for GPL and its customers, he said.

Lynn said that even when other factors are resolved, to sign a meaningful Power Purchase Agreement, "GPL will have to be able to demonstrate that we (or more correctly our customers) will be able to make the necessary payments fully and on time."

"GPL's current structure does not permit this to be done. However, the hoped for agreement between Government and AC Power about a revised framework for the operations of GPL will enable GPL to do so, if it is justified technically and financially.