Diversification plans for the Guyana Sugar Corporation (GuySuCo) have been delayed as the government seeks approval to reallocate funds from a $30 billion bond as some priorities have changed.
“We are not necessarily tweaking the terms but tweaking the purpose. Because, for example, one purpose was that the monies would be used for co-generation and buying machines and so on, that will allow them to generate [electricity]. GuySuCo may have a different stance as of now. While they agreed that co-generation is an option, they don’t see that as their top option anymore and so they want to concentrate on activities that will bring the three [sugar] estates into oneness and viability as quickly as possible. And that would require a reallocation of the investment plans that are available; maybe away from co-generation for the time being, but the terms of the bond remains the same,” Minister of Finance, Winston Jordan told Stabroek News in an interview last week.
“Since new management has come in and with the adjustment of the vision, the outlook, the priorities of GuySuCo, the nature of the existing bond might not suit that. So there has been a request for changes, a modification of the bond requirements to allow GuySuCo to advance in the areas they might have as priority,” Jordan said.
Government’s holding company, the National Industrial and Commercial Investments Limited (NICIL) and its Special Purpose Unit (SPU) last year secured the $30 billion bond from a group of local and regional banks for the revitalisation of GuySuCo’s remaining sugar estates. The SPU has been entrusted with overseeing GuySuCo and its assets. According to the bond agreement, funds are to be used to purchase equipment for plantation white sugar and co-generation plants and to meet operational expenses, including wages and salaries.
Jordan told Stabroek News that GuySuCo had relayed the requested changes and co-generation is no longer one of the corporation’s “top priorities” at this time. “NICIL will have to go back to the bond holders and put the case to the bond holders. In the meantime, we continue to pay interest because the bond is as is,” he added.
The minister disclosed that so far, about eight to nine billion dollars have been disbursed from the overall sum. Already, some $132 million has been paid in interest with another payment due in three months’ time.
“The bond existed as of the time we took it. There has been no adjustments as to the terms of the bond. As for the bond interest, the first payment had been made in June, to the sum of $132 million or thereabouts and the next set is due in November. So we have to find monies for those payments. The terms are the same; ‘this is so much, the interest is for so much, the months’…and that is not changing. What may change is the categories…,” he said.
Feud
The matter of the ongoing two-year feud between SPU and GuySuCo was also raised with the Finance Minister.
The two entities have been in a power struggle for roughly two years, with each accusing the other of undermining its efforts. In June, the SPU, at a press conference, charged that GuySuCo is not adequately accounting for funds it has received and has withheld pertinent information on spending. GuySuCo, however, said that the SPU wanted to use it as a scapegoat for its actions.
Among other things, GuySuCo’s managers had also appealed to Agriculture Minister Noel Holder to seek the urgent intervention of President David Granger to immediately remove Acting head of NICIL Colvin Heath-London from overseeing the divestment of its assets, while accusing him of pursuing a “vendetta” against the company.
Jordan was asked why government has allowed the feud to continue for so long without intervention and he said that he believes the tussle is unnecessary.
“It is an unnecessary feud, and it reminds you of the things you see on Discovery Channel among prides; you know, you have one pride and then another pride comes to the area and they defend their territory…I don’t think GuySuCo appreciates that some of their independence was lost in the whole scheme of things,” he said.
The Finance Minister said that if GuySuCo was a profitable organisation, they would have had no need to rely on NICIL/SPU and there would have been no power struggle. But the reality is that the sugar corporation is floundering and keeps returning for bailouts, he said.
Jordan said he wanted to make clear that he was in no way “bashing GuySuCo” but the corporation has to understand that both sides are government entities and are working towards a common good for the industry. He said that many persons don’t understand the arduous task that PricewaterhouseCoopers had in its valuation of GuySuCo’s assets and blamed poor management by the corporation.
“NICIL is not an interloper. It is owned by the Government of Guyana. NICIL was established to hold Government of Guyana’s assets including shares, and to invest those assets, manage those assets in a profitable, efficient, and transparent [manner]. So this isn’t some company from Mars or some private company that wants to lord over it. This is two government entities,” he said.
“Now the quarrel comes because of interpretation of the bond release. I think it has to be made very clear that NICIL does not disburse money. NICIL has to go to the bondholders and request money. The bondholders will not just release…they want to know what the previous money did, what it was used for, were these monies used for the purpose for which the bond was identified for it to be used? And when the bank is satisfied, it could look at your second request and your third requests, or your fourth request and so forth. All this with the understanding that the monies are being used for the intended purposes and they are properly recorded and properly reported. So I think this is where some issues are,” he said.
“The second thing is that the assets that NICIL holds were to be divested and money from the divestment part of that used to develop the three remaining estates. The SPU was established under NICIL. We had the acquisition of the services of PricewaterHouse and all of that. They came and what they found was a situation where GuySuCo had all these estates but no defined boundaries for each individual one. They had no respective defined assets. So the work of PricewaterHouse took longer than it should have had, much longer…you have to talk to them to get an appreciation of what is what. Then you had a scenario where equipment in many of these estates were cannibalised rapidly before the handing over to NICIL. Spares from one estate taken to the other so you don’t know which was for what. All kinds of things,” he added.
Assets
Another area that the Finance Minister said he felt needs clarity is where some persons and even GuySuCo executives are saying that the corporation’s assets were used to secure the bond.
“Not a single asset of GuySuCo is backing the bond. The assets that are backing the bond are the assets of NICIL, and they have a super backer in the government. But none of the assets, none of the assets of GuySuCo has been used to back the bond,” he emphasised.
He posited that while GuySuCo could have itself tried to secure the money needed for revamping, “there was no, no way the bank would have lent them. They would have absolutely not been able to secure the bond. I think the story you have to get from GuySuCo is one based on history and so on and then you will understand”. He added that for decades, the corporation struggled to access “new monies” from the banks.
Asked if he and the government were satisfied with the current state of the corporation, Jordan said that question would be best put to Holder under whom GuySuCo’s management falls.
Nonetheless, he underscored that President Granger has a vision for the sugar sector and will never abandon the people who built it and their ancestors. It is for this reason, Jordan said, that the president stresses as often as he can that more has to be done to demonstrate to the people that they will not be abandoned.
“The point I’m trying to bring over is that we have never abandoned sugar. The president says we don’t intend to abandon sugar and we have to put every penny available to sugar. And despite all the negatives, we continue to give sugar the priority it deserves,” he said.
“The president and his government has a vision for sugar in the short, medium and long term,” he added, while pointing out that one part of that vision is for output of 150,000 tonnes of sugar.
“We will not jump up and say ‘150 000 [tonnes] tomorrow and we be competitive’. We know it is a gradual process. What we’re looking at is the gap between production costs and price; that it would be significantly decreased. The last action plan had put them to making that sometime around 2022 or 2023. Hopefully, it can be speeded up and we have also said publicly that we intend to use some of our resources to plug into sugar to aid with the speedy revival of the industry,” he said.
