The three remaining bidders for GuySuCo’s Skeldon, Rose Hall and Enmore estates should know government’s decision by the end of this month.
Wilfred Baghaloo, Managing Director (Deals) of PricewaterhouseCoopers (PwC) Tax and Advisory Services Limited told Sunday Stabroek that by January 21st, 2019, PwC will submit a report and recommendation on the way forward to the steering committee of the National Industrial and Commercial Investments Limited (NICIL), including the preferred bidder or bidders
PwC was contracted by NICIL’s Special Purpose Unit (SPU) to undertake valuations of the assets of GuySuCo in order to secure prospective investors.
After the evaluations are completed and PwC submits its recommendation to the NICIL steering committee, it will then give the information to government. It will be Cabinet that will make a final decision. “PwC would give the score, because they will use a scoring system for the business plans as they evaluate them in terms of technical and financial aspects and that sort of thing. They will look at the bids, score, make their evaluation and recommendations but we still have to submit to Cabinet,” Head of NICIL Horace James had previously explained, while noting that Cabinet will make a decision on the information that PwC and the steering committee submits.
“I hope we are talking early next year. Yes, I hope by then [the end of February] that we would see them sold off,” he had added last year, when asked about an expected completion date for the divestment process.
Last Friday, Baghaloo met with the steering committee and acting head of NICIL Colvin Health-London to provide an update on the process of evaluating bids for the divestment of the estates.
While he would not go into details, he told this newspaper, “The meeting went well. The members asked a lot of questions. I pretty much showed them the challenges, the opportunities and the way forward.”
He confirmed that only three companies out of the five that had bid were being evaluated because two had failed to meet all the requirements. However, he said that due to confidentiality commitments and because the bids were still being evaluated, he could not state who the two disqualified companies were. However, he informed that they had been notified and had not objected.
“We have gone through those five bids, we have ranked them and out of those five bids we have come up with a ranking for three of them. Two of them were not compliant with the necessary requirements, as was stated in the Information Memorandum. We have, with the three companies, gone through a process of clarification, which we had started in the middle of November,” he said.
“The reason I am here is to communicate the results of the clarification process to the steering committee, SPU and the NICIL Board. We really cannot comment too much, at this point, what [is] the result of the clarification process but I may say that we are ninety percent complete,” he explained.
Baghaloo noted that he could not identify three companies in the running. “To be honest, that is for the government to say and not me. They are competitors and we have to manage the bidding process,” he added.
In November of last year, 10 submissions were received for the three estates, with only five companies entering bids.
The names of the companies, released by the SPU, and the respective estates for which they bid are:
Baghaloo had attributed the lower than expected number of bids to uncertainty over the functionality of the estates and concerns about competition from the state-owned GuySuCo.
“The major concerns of potential bidders related to regulations that are needed to ensure fair competition [with] government, that is, the legacy, GuySuCo,” he had told reporters, the day after the tender opening that saw the 10 submissions.
“Part of the concern was that a lot of people were worried—‘What are we really buying? Are we buying scrap metal or going concerns?’ There was also concern about the regulatory environment…‘How do we compete with government?’” he added.
He said that those concerns “pretty much remain” and some persons have also enquired about the effects on the deal of the recent no-confidence motion against government as well as the current bitter feud between SPU and GuySuCo.
The latter issue, he noted, was brought up by one stakeholder, who posited that, “If you can have two government agencies in the same industry being so antagonistic to each other, what would happen when I the private sector comes into play? I will be competing with you in many many respects.”
Last December, senior managers of GuySuCo asked the corporation’s Chief Executive Officer Dr Harold Davis Jr to move to suspend the company’s relations with the SPU, citing a turbulent relationship that they say has undermined its business over the last year and a half.
So toxic is the engagement between the two entities that the managers have also recommended that the SPU be evicted from GuySuCo’s LBI Compound, unless it agrees to comply with the policies under which the sugar company operates.
Questions were also asked about the no-confidence motion. “I don’t know if it is a concern per se, but we have received questions on what do we think about it. As far as we are concerned, political parties come and go but governments remain. Our experiences in other countries are, if an agreement has been reached, an agreement has been reached. If it has been consummated, how will we not consummate it? I don’t see that as a major issue but people have asked the question on what we think,” Baghaloo said.
The bidders also raised other issues and PwC related those to the steering committee.
“We received concerns about the enabling environment—How the structure would work? How can they compete with GuySuCo? A concern was if GuySuCo would have subsidies and should they expect to compete with a company that is likely to get subsidies. Because they are concerned that if GuySuCo gets subsidies, and they are both competing for the same market, then GuySuCo can underprice them,” he said.
“The sugar industry itself is very challenging. Like all commodities, it has its peaks and valleys and it is now in the valley stages. You have to be in the business for a long time to withstand the shocks. We are privatising at a point when sugar is at its lowest trading. There are concerns about an enabling environment, access to how you integrate sugar into your energy sector, how the private sector accesses markets, logistics…and sugar forums which are country-specific. Those things are country-specific, not company specific. But for the most part, we believe they have submitted good documents, with good thought processes but until we get there and that ten percent is complete then we would know. They say in law it is the two percent that remains in signing an agreement that is the hardest and challenging area. It is always the last part of the agreement that takes the most,” he added.
But despite the concerns, the PwC rep believes that the country will be pleased at the recommendation of his company. “Despite these challenges, there is a good horizon for the sugar industry, I believe. We believe there are one or two of the bidders that have some transformative plans but we await the completion of the process. What we are focusing on is the ability to finance. The ability to finance is the most important at this stage.
“I believe, we will actually make the government and the people of Guyana happy in the medium to long-term. There are no short-term fixes here; only medium to long-term,” Baghaloo said.
The sale of the estates could be a lifeline for the thousands of sugar workers, who have been laid off after government closed the estates at the end of last year.
GuySuCo retains the Uitvlugt, Albion and Blairmont estates.