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Chinese company will face liquidated damages
The Chinese company responsible for the construction of the new Skeldon Sugar Factory will face liquidated damages for the delay.
The new Skeldon Sugar Factory
This newspaper was told that discussions have already begun, as the Chinese Embassy in Guyana has been briefed on the issue.
The sugar crop has ended and the factory is yet not fully operational, as engineers continue to identify and fix recurring problems.
On September 15 last, Site Representative of China National Technology Import and Export Corporation (CNTIC), Andrew Jin, told the media that the trial run showed that there were problems between the punt dumper and the conveyor belt, while at the same time difficulties have been encountered with the shredder bearings.
‘Choking’, he had said, was occurring when fresh water was pumped into the diffuser.
This same problem recurred at the second and third evaporators.
Two days after it was announced that the factory was indeed having technical difficulties, Agriculture Minister Robert Persaud said that Guyana was examining legal options and remedies which can be enforced against CNTIC.
The minister said that fines can be imposed under the contract signed between Guyana and the Chinese company. The fines can exceed US$5M.
Subsequent to the announcement, President Bharrat Jagdeo also announced that CNTIC will have to take responsibility for all losses and delays suffered at the factory.
Following the official handover of the factory, there are three further 72-hour tests which can be carried out by the owner during the next year.
During that period, the contractor is still responsible for defects arising from those tests, despite the fact that the factory would be in commercial use.
The new factory is expected to produce 110,000 tonnes of sugar a year.
But even as the factory is yet to be up and running, the Guyana Sugar Corporation is experiencing major financial problems, as the company will end the year with an almost $3B deficit.
On Saturday, President Jagdeo announced that there will be a shake-up in the sugar sector to achieve increased production.
He said that production has been deteriorating.
According to the Head of State, while there are unanticipated circumstances that led to the decrease in production, he is also aware that there are significant management issues at GuySuCo.
Meanwhile, GuySuCo is currently seeking to borrow some $3B from the international community to cover full financing for the entire next year.
The company has, for several years now, been borrowing money from an international bank at the beginning of the first crop to cover crop financing, which it repays from its own self-generated cash before the end of each year.
However, one of the banks from which GuySuCo has been borrowing money has since closed its doors.
Yesterday, President Jagdeo said that he is not very worried about this fact, since the sugar company can seek financing from other lending institutions.
An independent examination into the low productivity of GuySuCo’s East Demerara sugar estates has concluded with the need for urgent major rehabilitation of the infrastructure on the estates.
Over the years, GuySuCo has consistently reviewed its production targets, including this year’s.
GuySuCo has come in for heavy criticisms over the past year, with its problems compounding when the arbitration tribunal, set up to deal with the wages dispute between the corporation and its workers, ruled that the company should pay $1.3B to its workers.
This accounts for a six percent across-the-board payment along with a further 2.1 percent one-off payment as cost of living adjustment for 2008.
However, given GuySuCo’s financial constraints, the company has been given until March 2009 to pay the living adjustment to workers.
Soured wage negotiations between the company and GAWU resulted in workers taking industrial action which lasted for almost four weeks.
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