Sugar plan sees closure of LBI factory – boost at Enmore, more machines and ethanol plant

The plan pointed out that major capital investment is required and suggested that funding must be provided to increase production to 400,000 tonnes and beyond. “It was evident in 2008 that the corporation has lost the ability to cushion itself in times of low cash generation, exacerbated by the need to spend an extra US$16 million on the new Skeldon factory that was not provided for,” the plan said while noting that there is no realistic expectation of GuySuCo being able to be self-sufficient in cash terms in 2009. It stated that in the absence of the normal commercial option of borrowing for the medium term, the corporation “regrets that it has no alternative but to request a cash injection from its shareholder [government]”.

According to the plan, GuySuCo needs initial financial support for the capital investment programme to the tune of $11 billion and assistance in sourcing the external financing for the capital programme over the remaining years, 2010-2013. It pointed out that delays in executing capital projects will continue to have debilitating effects on the productivity and efficiency of operations, adding that the execution of the 2009 capital performance is already delayed.

Restructuring

After revisiting the 2004 strategic review, the plan proposed a reconfiguration of the East Demerara estates since the interim board considers it “financially prudent and strategically sensible”. It pointed to the loss of Diamond lands, adding that a one-factory scenario at Enmore with a grinding capacity of 135 tc.hr is suitable for the Enmore and remaining LBI lands. It revealed that grinding hours for LBI and Enmore have consistently been less than 125 hours/week since 2005, adding that high costs have been incurred over this period from grinding at two factories that are in proximity and well below their capacities. Consideration was therefore given to grinding the canes from Enmore and LBI estates at one factory (Enmore).

The plan said the interim board found that “at steady state financially there was a loss of 18,000 tonnes of sugar annually ($1.8 billion),” noting this was compensated by an operating savings of $2 billion annually from operating one slightly bigger factory than two small factories. “Therefore there is approximately a net cash inflow of $0.5 billion from 2012. Over the ten-year period to 2018 a net cash inflow of $5 billion is forecast,” the plan said while stressing that this move would not result in any redundancy of workers.  According to the plan, the interim board chose Enmore because the Packaging Plant will be based there and there will be accelerated mechanization at that estate. It said that Enmore will therefore become a modern agricultural industrial complex.

Another key feature of the restructuring is the grouping of the eight estates into two regions – Demerara and Berbice excluding Skeldon. The Demerara region comprises Enmore, LBI, Uitvlugt and Wales, while the Berbice region comprises Albion, Rose Hall and Blairmont. Each region is headed by a Regional Director, reporting to a Deputy Chief Executive Officer (DCEO), with the Estate Manager reporting directing to the Regional Directors. The Agriculture and Factory Managers will report to the Estate Manager while Skeldon will continue to operate independently with the General Manager reporting to the DCEO.

Ethanol plant

The plan said that an ethanol plant is expected to be commissioned by 2012 and it recommended that government assist the corporation with securing an investor. It was noted that GuySuCo’s June 2008 Business plan projected an Ethanol Plant/Distillery, constructed during 2009 and operational by 2010. The plant was expected to produce 13.2 million litres of ethanol or alcohol with full capacity achieved in 2014, requiring just about 50,000 tonnes of molasses feedstock. According to the turnaround plan, since production estimates are now lower than projected in the previous business plan (2008-2016), the operational year for the plant will be pushed back to 2012.

Further, the plan said, the proposal of building a refinery by 2015 is on the back-burner due to “current economic assumptions”. It also called for a review of this project based on an updated feasibility study.