Jagdeo questions planned borrowing for sugar estates, revised targets

Bharrat Jagdeo

Opposition Leader Bharrat Jagdeo on Thursday criticised government and Minister of Finance Winston Jordan on the heels of the announced plan to borrow cash from local banks to reopen two sugar estates and to fund critical current and capital Guyana Sugar Corporation (GuySuCo) programmes.

Jagdeo, a former Minister of Finance, called the move nonsensical, while saying government was borrowing without even knowing the current value of the estates up for sale and therefore could not guarantee it would receive the needed sums to repay the incurred debt.

“If they are going to spend US$75 million or GUY$15 billion, how come he knows that they are going to get US$75 million for the two estates? Is he guaranteeing us that the base price for one of the estates would be US$75 million? Why not just allow the investor to take over the liabilities too as part of the negotiation?” he questioned at a People’s Progressive Party (PPP) news conference.

“It is not transparent and I don’t have much faith in Jordan’s instinct and his economics,” he added.

Jordan had said on Wednesday that for the limited reopening of the Skeldon and Enmore sugar estates next month, government was in the process of borrowing between $10 billion and $15 billion from local commercial banks here. A statement from his ministry subsequently clarified that the proposed sum to be borrowed is not solely for the reopening of the Skeldon and Enmore Sugar Estates but also includes the financing of critical current and capital programmes, if GuySuCo is to achieve the revised target for this year and the projection for 2019.

“NICIL [the National Industrial and Commercial Investments Limited] is looking to get some financing out of a commercial bank, short term, well a kind of syndicated bond just similarly like the AHI [Atlantic Hotels Inc.] and the building of the Marriott. So, similar to that,” Jordan told reporters on Wednesday.

“Short term financing, maybe three to five years, and in that period the revenues that will come from sale of estates… I think it can be anywhere between ten [and] fifteen billion dollars,” he added, while saying that a sale could be possible over the next six to nine months.

Stabroek News reported last week on the decision to reopen the Skeldon and Enmore estates by the end of March, which would see some cane cutters reemployed. According to sources, it is to demonstrate to potential buyers that the estates are viable and can therefore be sold as going concerns.

The source explained that there is currently over 300,000 tonnes of sugar cane in the fields of the Skeldon, Rose Hall and Enmore estates and it was government’s Special Purpose Unit (SPU) which proposed that the estates be reopened to utilise the cane.

Jordan later confirmed this, while saying that the SPU would be seeking financing for the reopening.

“If they are closed then the interest of investors and how much you will be able to get from a buyer may be considerably less, so the thinking is to keep them in motion,” the state-owned NCN quoted Jordan as saying.

“The Special Purpose Unit of NICIL is in discussions with a bank to seek short-term financing to get these two operations going for the short term even as they pursue the parallel operation of getting these estates valued and attracting investors. My understanding is [there have been] more than 70 responses to the invitation for bids,” he also explained.

He also justified the decision to borrow for the reopening, saying that not only would it garner more revenues but that the repayment would come from the sale of the estates and there will be no burden on the state’s coffers.

“This is a government debt. When we get a buyer, the revenues from the buyer we will use to service the debt. The idea is to have them opened and available to the buyer so to speak. A house deteriorates faster when it is closed,” Jordan said.

“If they are closed and moth-balled and buyers come, they are probably not going to be impressed as if they were working and seeing the estates are valuable properties to be acquired essentially,” he explained.

He also underscored the importance of having an estate which caters for the production of molasses to meet the demands of manufacturers of alcohol, while noting that government did not want entities like the Demerara Distillers Limited having to turn to importing molasses.

But Jagdeo said that according to his calculations, the sums now being sought did not add up and he believed that there is a plan afoot to clear the debts of the estates to make clean books for a lined up buyer.

“My worry is that they need the $10 billion to $15 billion to clear off liabilities for GuySuCo so that the people that they have already identified would come in with a clean slate. So they would have a big prize,” he said.

Jagdeo added that his party would be keeping its eyes open on the development and awaits the result of the decisions.