August 7th, 2023
The Progressives Opposition welcomes the Premier’s latest announcement that he now expects to achieve financial close on Project ReGen by 30 September. This is, of course, not the first time the Premier has assured the country that the contract negotiation will soon be complete. I hope that, unlike previous occasions, he will be correct this time.
Whenever the Premier does announce a final contract signing, he must also answer for the serious challenges his delays have created for the country. In particular, he must account for every dollar of the considerable cost increase the country will face.
If the contract is completed in September, it will be some two years late, and as we expected, this delay has increased the cost and risk to the project.
In the arguments on ReGen with his former Deputy earlier this year, the Premier admitted to the country that the project costs would increase significantly, perhaps to $1.5bn. That is more than double the expected costs when the last Government signed the Project Agreement in 2021. This extra cost is down to the PACT government’s inattention to the project and the reopening of previously closed issues.
At the same time, the risk that Cayman will run out of usable landfill space has increased. Had the contract been closed by the initially agreed deadline of September 2021, the space left at George Town landfill would have lasted for decades. The two-year delay means the country could run out of landfill space in the next few years, with the ReGen facilities still needing to be completed.
The original deadline for the financial close of the contract was in September 2021. The PACT government’s failure to reach financial close by September 2021 meant that the Project Agreement terms had to be renegotiated, including the price that had previously been agreed.
The 2021 Project Agreement gave this country price certainty. The cost of the new facilities was then fixed at $205m, with the financing cost for that being bundled in with the operating expenses so that the contract would mean the Government paying an average price of $163 per tonne over the 25-year life of that project. The expected total cost of the contract in cash terms at the point the 2021 Project Agreement was signed was just under $670m.
Had the Premier done his job, pushed hard for the negotiations to be completed and got the project over the line on time, $670m would have been the cost to the country. Because he failed to do so, all the project costs were up for renegotiation, allowing everyone in the supply chain to revise their prices.
And so, the Premier was finally forced to concede to the country that the costs would now double to $1.5bn. He must account for every dollar of the cost increase to live up to his claims of transparency. No excuses by the Premier will hide that the reason for the dramatic increase is solely the delays that PACT has caused and the renegotiation of previously agreed contract items.
We have sounded this warning consistently since it became clear that the original deadline had been missed. During the Parliamentary debate on the current budget in November 2021, the Leader of the Opposition said:
“Whatever new deadline he has established, the Premier should also level with the country about the consequences of the delay that his inattention has created. With any delay comes increased risk, higher costs and more environmental damage as the solution to the waste problem gets kicked down the road. We have previously asked the Premier to answer a series of questions about these consequences for the country. Despite his professed commitment to transparency and accountability, he has declined to answer those questions.”
The time is coming when the Premier can no longer dodge questions. He must come clean to the country and explain why the cost of this project has spiralled.
The Premier must also acknowledge that among the other problems that the Government’s delays have caused, the most pressing is the environmental damage of continuing to landfill and the risk that we may run out of landfill space before the Regen facility is built. Once again, I repeat that this risk has been caused entirely by the failure of this Government to complete the contract on time.
When the Progressives government signed the 2021 Project Agreement, it was estimated there were 5-6 years of landfill space remaining if the country continued to landfill at the existing rate. Our plan would have meant only three years of landfilling while the waste-to-energy facility was built. The Premier’s delays have added at least another two years of continued landfilling at the current rate.
If there were 5-6 years of space left in March 2021 and the facilities do not now get built until late 2026 at the earliest, it is plain to see why the risk of landfill space running out has become critical.
Our plan also meant that with 95% of our waste being converted to energy, there was plenty of space to accommodate the remaining 5% residual waste at the landfill for at least another 25 years. That is, if the ReGen facilities had been built and commissioned as initially planned. The Premier’s delays have added another two years of continued landfilling at the current rate, significantly reducing the space needed for future residual waste after ReGen is built.
We are fast running out of time and landfill space.
Cayman needs a long-term solution to its waste problem. Project ReGen delivers that solution with state-of-the-art built waste facilities instead of our unsustainable reliance on landfills. Project ReGen is also good for the environment by converting trash into energy, removing landfill gas from the George Town landfill, and converting that into energy rather than leaking into the atmosphere. It is a pity that the country will now be paying more than it needed to and will face additional risks because of the Premier’s delays.