THE Guyana Sugar Corporation (GuySuCo) is still awaiting funds from the recently issued US$ 150M equivalent bond facility issued by the National Industrial and Commercial Investments Limited (NICIL) and arranged by Republic Bank Limited exclusively through its Investment Banking Division.
According to NICIL, the proceeds of the bond will be used for capital expenditure and general operations for the sugar corporation. NICIL in a statement back in June had said that the bond would be issued in multiple tranches, with the first tranche of roughly G$17B or US$85M equivalent being issued to local investors on Friday, May 24, 2018.
Chief Executive Officer (CEO), Dr. Harold Davis Jr in a recent interview said, “A lot of those funds have not yet been released.” He said in order for the sugar company to revitalise and modernise its operations, it will need a cash injection.
“At this point, GuySuCo, apart from paying our wages… we have not really been in a position to launch the kind of improvements necessary, accelerated improvements that we really need to take the industry forward.
“I know there has been a lot said in the press about all this money, but strictly speaking is not quite true, because we have not yet received the funds we really need for the injections,” said the recently appointed CEO. The bond has been secured to recapitalise GuySuCo’s operations.
The sugar corporation did request some $42B to advance its strategic plans and noted that monies received thus far catered for wages and fuel expenses, “but we have not received any other monies.”
“We have some money that we negotiated. A lot of those funds have not yet been released for our capital programme. There is a commitment to release some of these funds, but we have not physically gotten any,” he said, while adding that no timeline has yet been given for the release of those funds.
Historically, cash-strapped GuySuCo struggled on its own to raise the funds needed to revamp its operations. However, NICIL’s Special Purpose Unit (SPU) headed by Colvin Heath-London was able to secure funding through the stated-owned entity with the support of the Government of Guyana through a sovereign guarantee. The benefit is a 4.75 per cent rate of return which represents a tax- free bond.
Additionally, Dr Davis Jnr noted that it is the SPU’s job to dispose of GuySuCo’s assets and when sold, the proceeds are to be handed over to the company for development of the three current estates — Blairmont, Uitvlugt and Albion.
NICIL through its SPU took control of the Skeldon, Rose Hall, Enmore and Wales estates when government decided to close operations early this year in order to maintain the viability of the sugar industry.
“SPU has negotiated a bond and I am not fully aware of the terms, but we have a strategic plan, a strategy as to how we want to spend the money on the estates. We submitted a request of what we wanted… We need $42B,” the CEO stated, while noting that GuySuCo will generate funds through its operations.
“We need to spend money on refurbishing our fields and factories to enable us to start producing at a more efficient rate and to modernise our existing facilities. Once we start doing that, we will also generate some funds and the capital that flows into the business we will further extend our operations into more value- added,” he said, adding that the co-generation project requires detailed engineering.
He explained that co-generation can be looked at as a stand-alone plant, while emphasising that it is GuySuCo’s plan to repair degradation of the industry.
Asked whether he believes the three estates can live up to the company’s expectations, Dr. Davis Jnr said each estate should be looked at as a stand-alone company, with Albion being the biggest in Berbice. Plans are in train to have the Albion estate modernised to produce white sugar.
When asked about Expressions of Interest (EoI) for the privatisation of four estates under the remit of the SPU, the CEO said those estates are the children of GuySuCo and noted that at one point they produced large amounts of sugar. He said there is no need to compete with private investors as there is still a market for sugar produced here.
Dr Davis Jnr reminded that the Commission of Inquiry (CoI) into the ailing industry had recommended privatisation of the corporation as early as is practicable. The report which was laid in the National Assembly, also called on the state to divest itself of all assets, activities and operations currently associated with GuySuCo.
“In the interval, as the privatisation process is awaited, the new management of GuySuCo must focus on basic essentials to rehabilitate the fields, factories and infrastructure of GuySuCo. There should be no accommodation for new projects, which will create demands on the limited funds. This is aimed at making the estates more saleable and attractive to investors, both local and foreign,” the report recommended.
“The three estates we have are open to participation by investors – we never said [the CoI] GuySuCo must remain a state entity so we will be open for partners—to investors and partners. In my view, if you want to go into a big project like co-generation that requires a lot of factory engineering, there is no reason why we shouldn’t have a partner. Private partnership is good for any business—private ownership brings in a different type of thinking,” the CEO stated.
The Government of Guyana has since received offers to purchase all seven estates, something which it is examining closely.
MUST BE CAUTIOUS
But Dr Davis Jnr said the government must be cautious, while pointing to Jamaica’s experiences in this regard.
He said, when property is sold, it is important that the buyers have a clear understanding of the nature of the business.
“Jamaica found that the new investors were not successful because they did not understand the environment in which they operated. It is very important that when somebody invests in a business they understand the nature of the industry….every country has a unique environment,” the CEO added.
Meanwhile, when asked whether the sugar company intends to keep the workers employed, he said “Workers are critical to the operation of the business,” while noting that as the business changes there will be an increase in demand for skills.
He stressed that when the tools are provided for modernisation of the industry, it would prove beneficial to have workers skilled in several areas. “The three estates are short of manual labour; we have vacancies,” he declared, while explaining that the company is moving closer to loading its cane by machines.
“I envisage that we have to prepare ourselves for the time to make use of technology that is available. Making use of technology is a good thing, it is cheaper for us and it provides the worker with skills – workers are better paid…we have to make use of whatever human resources we have and we have to train people to do things differently. Strengthening human-resource capacity is critical,” Dr Davis Jnr stated.
He made it clear that GuySuCo has its own strategic plan and with sufficient resources, he believes that within three years changes would be evident. The CEO was quick to note that there would be the monitoring of the entity’s short, medium and long-term goals.
“The plan is to equip ourselves to respond to the changing environment…If the estates assets are sold, we won’t need that bond– the estates assets are worth more than the $30B syndicated bond,” he said, while noting that the estates comprise some 30,000 hectares of drained agricultural land as well as factory facilities.
“You can’t put a price on that really. GuySuCo’s financing should be tied to the recovery from the company’s assets. We seem to be linking it to the bond and not the asset,” while reminding that $30B is not a lot of money in the context of the four closed estates. “Those estates have a lot of value”, he declared.