Antigua St. John's - Six and a half months ago, on the 15th of December, 2011, Caribarena was the first to raise the question, did we receive value for money in the Chinese Power Plant? And today, we would like to state conclusively that according to our research, the answer is a definitive no.
In order to understand how and why we arrived at this conclusion, it is important first to understand what is value for money, and how is it determined. According to Cambridge University, Value for Money is defined as, "a term used to assess whether or not an organisation has obtained the maximum benefit from the goods and services it both acquires and provides, within the resources available to it."
1. Economy - careful use of resources to save expense, time or effort.
2. Efficiency - delivering the same level of service for less cost, time or effort.
3. Effectiveness - delivering a better service or getting a better return for the same amount of expense, time or effort."
Following this guideline, Caribarena has compiled a list of 7 reasons why we have not received value for money. These reasons are all based on information coming from APUA, the Government, and our own tour at the Power Plant.
1. Numerous Technical Issues
⁃ Issues with Lube Oil consumption, sinking HFO Storage tanks, fuel mixing in to the lube oil, and more have been constantly plaguing the Power Plant. A new Power Plant may experience occasional issues in one or two of the engines, but issues that at times affect 5 of the 6 engines have a serious blow on its value. These issues were documented in an APUA report released in a prior article (see here).
2. High cost per Megawatt
⁃ A quote Caribarena witnessed for a new Power Plant from MAN Diesel and Turbo cost half a million dollars less per Megawatt of Generating capacity than the Chinese Power Plant. This means that even if the Wadadli Power Plant ran perfectly, it would still be more expensive than new Power Plant engines from Germany. These figures are explained in a prior article (see here).
3. Engines downrated to 4 mW
⁃ Several of the engines have been downrated from 5 Megawatts to 4 Megawatts, meaning they can only generate 80% of the electricity that they were supposed to generate. This means that the abilities, and as such the value, of the affected engines has decreased, without a lessening of the cost to compensate. This was documented in the same APUA report previously mentioned (see here).
4. Engines Constantly Offline
⁃ At one point, 5 of the engines were down. As we speak, 3 of the engines are down. At any time that the engines are down, APUA is losing money because they are not selling electricity. If the engines are down for weeks or months (as is the case), APUA is loosing significant sums of money. If the power plant is not making money, it is not returning on the investment made to purchase it, and as such, the value is significantly decreased. This was confirmed by APUA electricity manager Lyndon Francis and Mechanical engineer Brian Nicholas.
5. Total Sum to be Repaid Constantly Grows
⁃ The RMB is held artificially low by the People's Republic of China. International pressure on the Chinese Government forces China to let the Yuan dollar rise closer to its proper value gradually. The Chinese yuan has been strengthening in relation to the US dollar consistently since 1994. As the yuan continues to appreciate, Antigua will have to pay more and more and more. In 2008, when the loan agreement was signed, 300 Million RMB was equal to roughly 43 million US dollars. Today, it is equivalent to 47 million US dollars. Antigua has received no added value to compensate for this increase in cost. Therefore, we are not receiving value for money, and as the Yuan continues to appreciate, this will only get worse and worse. See here for Chinese to US dollar conversion rates history.
While it is true that owning an asset is advantageous in some situations, it does not add value to the item when calculating value for money.
Any power plant that the Government or APUA purchased would have been owned by them. It is not a feature or characteristic unique to any plant, and when considering whether the Wadadli Power Plant has provided value for money, the fact that APUA, the Government, or the People own the plant does not increase its monetary value.
If the Government were to attempt to sell the Power Plant, the fact that each engine can produce electricity provides value, but the fact that the Government owned it would not increase the value. Ownership over the plant does provide sentimental value, but it does not increase monetary value.
Furthermore, neither the Government, APUA, nor the People of Antigua and Barbuda own the Wadadli Power Plant. The EXIM Bank of China owns the Power Plant. If tomorrow the Government doesn't or can't pay the loan back to the EXIM Bank, they will take the Power Plant away.
So while APUA maybe operating the Plant, it will be many years before the Power Plant is truly owned by the People of Antigua and Barbuda.
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