In a bid to secure molasses for its rum production, Demerara Distillers Limited (DDL) has expressed interest in securing some assets of GuySuCo and sources close to the process say that its interest is in owning the Enmore Sugar Estate.
“DDL has submitted a proposal of its intentions to secure Enmore and it is to secure their molasses needs,” an official told Stabroek News.
However, the company’s Public Relations Officer Alex Graham would only say that an Expression of Interest (EOI) was submitted to the Special Purpose Unit (SPU), the body set up by the government to handle the divestment and privatization of GuySuCo’s assets.
“The SPU of NICIl put out an ad for expressions of interest for GuySuCo’s properties and DDL responded. In keeping with the EOI advertisement we said that given the future of molasses we are hereby securing our supplies. We don’t know what is there so we haven’t made a formal structured bid for anything. When the perspective is out we will know what we want,” Graham explained to this newspaper yesterday.
The SPU has to conduct a valuation of the available GuySuCo assets and this is the next step.
Stabroek News was referred to Graham by DDL officials when it approached the company for comment on the matter yesterday.
Pointing to a press release the company had put out last week, Graham echoed that GuySuCo will not be able to meet DDL’s molasses requirements for this year. “This is a real 2018 problem for which a resolutions is not in sight as yet,” he stressed.
In its statement last week, DDL had said that initial assessment of its distillery production for 2017 shows that is has surpassed projections, with an increase of 30% over 2016.
In keeping with this trend, it pointed out that distillery production for 2018 is now projected to increase by a further 25% over 2017.
“In this regard, DDL is concerned about developments regarding the state of the sugarcane industry, and the potential downsizing of sugar production. These concerns are grounded in the long historical relationship between DDL and GuySuCo, in which DDL is dependent on the sugar estates for its molasses raw material, and in turn is a significant source of cash flow to GuySuCo for its operations,” the statement explained.
“With the impending closure of sugar estates, there will be a considerable shortfall in molasses availability, which is directly related to the reduced projection of sugar production. In fact, based on production demand for local and international customers, DDL’s molasses requirement for 2018 is 70,000 tons. In contrast, GuySuCo has set a sugar production target of 115,000 tons at the three estates currently earmarked to remain in operation, with molasses production being pegged at 52,000 tons,” it added.
It added that in light of this shortfall, DDL has been “actively exploring” its potential role in the future of the sugarcane industry, and has commissioned a high-level technical and economic feasibility study on “innovative approaches” to use the existing sugar assets to meet the current and future needs for molasses for an expanding distilling industry.
DDL said it therefore welcomes the comments from Minister of State, Joseph Harmon, at last week’s post-Cabinet press briefing that the Government of Guyana is still open to options that keep the GuySuCo estates operational until arrangements are finalised for them to be privatized.
Graham made clear that it was not a blanket statement of government’s support from DDL as it was limited to only Harmon’s expressions on the matter. “It is that statement that we throw our support behind. Remember there is a distinction because you cannot say government because Minister (of Agriculture Noel) Holder is also of government and he is saying something different. So when Harmon says that government has not made a formal decision and wanted the closure until 2018, it is that [statement] we support,” he said.
DDL Chairman, Komal Samaroo was quoted in the release last week as saying that his company is, “optimistic that the Government of Guyana understands what is at stake, not just for the sugarcane industry, but for all other stakeholders that are a part of the GuySuCo value chain, including the many thousands who are directly and indirectly involved in the production, distribution and sale of DDL’s value-added products, both locally and internationally.”
Graham said that too that while the issue of impact of the closures is not fully discussed, “the impact of this has far reaching consequences… the Caribbean alcohol industry is a critical problem,” he said.
He maintains that while the company is seeking ways to deal with their molasses shortfall problem it has not made a direct bid for any of the sugar estates. “I read a letter today where a man said that DDL should take over Enmore and I am suddenly getting calls and everyone is asking if DDL is buying Enmore,” he said.
But sources told this newspaper that DDL has submitted a proposal to the SPU and has singled out the East Demerara Estate as its interest. The Private Sector Commission has also signalled interest in the Enmore Estate.
The source said that DDL wants to not only secure its molasses quota but to sell surplus to other Caribbean islands that needs the molasses for their alcohol uses.
“When the decision was made to close the estates they just looked at it from the perspective of direct sugar production and no one took into consideration how it will affect DDL and other molasses users. Grenada, Trinidad, Jamaica and other countries purchase their molasses from Guyana. With this country now not able to supply even here they would now have to turn to Latin American countries and the cost of their products will go up because Caribbean countries are not given the same type of preferential treatment through that Latin America Agreement. What I am saying to you is the molasses shortage will affect operations in the Caribbean directly,” the official said.
GuySuCo officials informed that even with three estates the molasses demand from Guyana and the Caribbean would not be met.
Banks DIH Limited officials said that the estate closures have no direct impact on their operations as they purchase molasses from Panama and they “are not as big on rum production as DDL.”
It said that because DDl has a direct contractual agreement with GuySuCo the company used to purchase from DDL but stopped and it has not regretted its change to international purchasing.
But DDL officials says that if it has to import molasses the cost of not only its but regional products would also go up.
“It is a very complex thing. Last year was evidence of how even more complex it can be. There was the hurricane which devastated many islands and countries that used to purchase molasses from Puerto Rico could not and for this year still cannot. If you look at the demand you will see the impact even further because if DDL has to import they will have to pay import duties and all other duties and taxes and their products will go up…that is a known. If other countries purchasing from us have to pay more it is only understandable that their prices for the medicines that used alcohol and such will also go up. It is not just about rum production because alcohol is used in many products produced in the region, the official added.
This newspaper understands that government is deliberating on proposals from both GuySuCo and the SPU before it makes a concrete decision on the way forward for the sugar industry here.
Only recently both GuySuCo and the SPU made submissions in front of Cabinet each putting forward their cases in ways they best saw it. GuySuCo officials says that at next week Cabinet’s meeting they are scheduled again to speak to government with the SPU present.
For DDL its “track record” speaks for itself as it boasts the billions it contributes in taxes and thousands that are employed directly and indirectly. “If DDL manages an estate cane cutters will be employed, the molasses demand from GuySuCo’s other estates can be subsidized and met and DDL has a track record of expansion and it is for the better interest of the country,” one official said.