Five years after it was launched with much fanfare, the flagship Skeldon sugar factory is only producing at 36% of expected output and the latest plan from GuySuCo projects its grinding capacity at far less than what its Chinese builder was contracted to deliver.
The poor result from the Skeldon Sugar Modernisa-tion Project (SSMP) has now forced the Guyana Sugar Corporation to scale back by 100,000 tonnes its expected annual output for the period 2013-2017 from 450,000 tonnes to 350,000 tonnes.
When it had been launched, the US$170M SSMP was meant to be the saviour of the sugar industry and to secure its future amid rapidly changing market conditions overseas and local labour shortages. Critics say it has not delivered and the latest GuySu-Co plan only makes projections for improvements at Skeldon but there is no clear basis laid out for a turnaround in its fortunes.
The long-awaited 2013-2017 plan has still not been presented to the public but a copy obtained by Stabroek News shows that ranged against its projected annual output of 110,000 tonnes of sugar this year, Skeldon was projected to produce only 39,883 tonnes of sugar this year. By 2017, GuySuCo is projecting that it will be producing 81,165 tonnes per annum by 2017 but even this will be 30,000 tonnes below what was promised in 2008.
A series of reasons were given in the new GuySuCo plan for the production shortfall and this included “poor performance of the Skeldon factory and poor factory recoveries”. How-ever, the more startling admission in the plan is that ongoing remedial work will see the huge CNTIC-built factory at Skeldon grinding only 250 tonnes of cane per hour compared to 350 tonnes of cane which it was expected to deliver. This figure is only 71% of what had been promised.
Questions will continue to be raised as to how both the government and GuySuCo accepted a factory from CNTIC which five years later is grinding and producing far below its rated capacity. In the five years since the problem-plagued factory was launched, the government and GuySuCo have steadfastly refused to say whether any penalties were applied against CNTIC or if measures will be taken to recover losses as a result of its work on the factory. There had been controversy over the choice of CNTIC as the company had not had experience with a factory of this scale. There had been another contender from India for this project but it was believed that the growing resort to China for aid by the then Jagdeo administration played a role in the final decision.
It wasn’t only on the sugar output side that the news was bad. The plan admits that whereas it was intended that a minimum of 69,204 MWh would be exported to the national power grid from a bagasse-fuelled co-generation plant, only 29,975 MWh was exported in 2012. The reason given in the plan for this was “Problems experienced with the Skeldon Factory and Co-Generation Plant; lower than expected cane supply/frequent out of canes resulting in lower bagasse production levels and lower steam generation resulting in dependency on the expensive Heavy Fuel Oil”.
The state of affairs at the Skeldon factory will see another $1.08b being spent over the next five years on the troubled plant – almost one-fifth of the total budget for the entire industry. It is surpassed only by the Rose Hall factory which will see expenditure of $2b.
Skeldon’s agricultural yield and factory recovery also tell the tale of the dire situation. The tonnes of cane per hectare was 54.14 when the overall industry target was 71.01. The best performing estate in this regard was Blairmont at 66.61. In terms of tonnes of cane per tonne sugar (tcts) , Skeldon’s current figure was 16.29 compared to a target of 11.25. All of the older estates were doing far better than Skeldon. The top performer was the Albion estate at 10.52 tcts.
The new plan acknowledges that since the commissioning of the Skeldon factory in 2008 the factory’s potential has not been realized. It said that remedial work was being done by Bosch Engineering of South Africa which will see heightened output of the factory from 185 tonnes per hour to 250 tonnes per hour. It would mean that at present, five years after launch, the factory was grinding at only 53% of its rated capacity. Though the plan mentions the work by Bosch it is silent as to any liability or remedial work by CNTIC.
In its profit and loss assessment for the Skeldon estate itself, the plan says that the loss for the estate in 2012 was a whopping $2.7b. The projected loss for this year is $1.8b. Profitability is expected to improve to $407m in the year 2017 once all of the expectations for improved factory performance are met.
The SSMP had been one of the projects that former President Bharrat Jagdeo had hyped up during his term in office. When the Skeldon factory problems arose, he had vowed to take a personal interest in the resolution of its difficulties but this appeared to have had no impact. The state of the Skeldon factory and the industry on the whole would also be a matter the current President, Donald Ramotar may have uncomfortable moments over. Critics say he was a key government director on the board from 1992 up until 2011 when he was elected President.