By Agnes Menanopo
Prime Minister Matthew Wale said the Tina Hydro project is a significant financial risk and should serve as an important lesson for the Solomon Islands Government.
Prime Minister Wale made the statement in parliament yesterday.
Tina Hydro raises financial risks-should be a lesson
Construction on the Access Road to the Dam site
Parliament then discussed the cost of the Tina Hydro project to the Government, including loans secured from the World Bank.
Minister of Finance and Treasury, Hon. Gordon Darcy Lilo, said that in terms of Solomon Islands’ relationship with the World Bank and the International Monetary Fund (IMF), Tina Hydro is by far the worst.
“Tina Hydro is a very bad one, honestly, that we ended up with two loans,” Lilo said.
He warned that walking away from the project would result in higher penalties.
“For us to break away from these loans…penalty goes even higher,” he said.
Lilo said the penalty involved is about US$60 million.
“We have tied ourselves to a punishment on a single figure, a fixed amount penalty,” he said.
Prime Minister Wale said the Ministry of Finance and the Ministry of Energy have requested an additional US$35 million for the project.
He said despite the financial challenges and loan commitments, the project has reached a stage where it should not be abandoned.
Wale said the Government has been discussing options with partners, including seeking grant financing through the Green Climate Fund.
“We are asking for grants. If we ask for a loan, the tariff will be way expensive and we’ll be stuck with it for thirty years. So, we are hoping that it will be granted,” he said.
He questioned whether the Government could walk away from the project after investing significant funds to date.
“We spent so much money on it till today, do we just leave it and walk away?” Wale said.
He said the Government is also considering options to buy out the loan components.
Wale said the loan component could reach about US$230 million by the time the project is commissioned, while the Government could still face a US$60 million penalty for breaching the sovereign guarantee.
He said the Government is continuing discussions with development partners to secure grant financing.
Wale said the current approach is to move the Tina Hydro project from the greenfield stage towards investment-grade grant financing.
He stressed that the experience should serve as an important lesson for the Government in managing major development projects and associated financing risks.
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