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GuySuCo sues Booker Tate for US$30M
… at issue is flawed Skeldon factory
Problems with the multi-billion-dollar Skeldon sugar factory has ended up in the courts with the state-owned Guyana Sugar Corporation (GuySuCo) suing its former European manager for US$30M.
GuySuCo officials appear before the Parliamentary Sectoral Committee on Economic Services on Friday.
Testifying before the Parliamentary Sectoral Committee on Economic Services on Friday, Chief Executive Officer, Dr. Raj Singh, admitted that GuySuCo did not get what it asked for. As a matter of fact, the Skeldon factory was built with design flaws that, almost five years after its commissioning, have caused the facility to underperform.
Booker Tate, which had been managing the industry until it was fired a few years ago during a fall out over the project, had initially sued GuySuCo for outstanding monies. GuySuCo, in turn, countersued for US$30M, Singh said.
The problems had been seen as major for the Skeldon project which reportedly cost Guyana in excess of US$200M, the most expensive infrastructure so far. It also included opening up new cane lands, conversion of fields to accommodate mechanical harvesters and allowing more private cane farming, with GuySuCo even hiring outside experts, including from South Africa, to fix the issues.
Six major ones remain, including a defective punt dumper, which will cost GuySuCo up to US$4M to fix, officials told the Parliamentary oversight committee.
The National Assembly has been expressing worry over the industry which grounded to a 23-year production low last year. GuySuCo has been asking for bailout money with the Opposition-controlled National Assembly agreeing to release $6B for this year for a number of critical works at the eight factories in Demerara and Berbice.
Dr. Singh, a former Chairman of GuySuCo’s Board of Directors, insisted that the Skeldon Expansion Project, remains a solid one with the plan initially to build a sugar factory, co-generation plant and sugar refinery. The idea was to bring down costs to 15 cents per pound of raw sugar and maximize on the factory’s potential to process 350 tonnes of cane per hour. Currently, GuySuCo’s cost of production is US$0.34 cents per pound and it is the hope that by 2017 this will come down to US$0.26.
However, several technical issues including the punt dumper remains to be fixed. The dumper is critical for a faster intake of cane from the fields to the factory. This had forced production to come down to some 220 tonnes- not a financially feasible scenario for the factory.
GuySuCo, to fix those pressing problems, will need about US$4M, officials said Friday.
Meanwhile, speaking on the performance of the Enmore Estate and nearby US$12.5M packaging plant, Singh said the latter is “performing well”.
With sugar prices plummeting from US$710 at end of last year to US$480 per tonne by February, Guyana is looking at the CARICOM markets to help the industry. He explained that last year, Guyana agreed to a waiver of the regional tax on sugar as it became clear that local production in 2013 could only suffice for the European market.
This year, GuySuCo was able to have its European client, Tate and Lyle, to agree to take less sugar if Guyana finds better price elsewhere. As such, GuySuCo through CARICOM will not be backing the regional tax waiver with markets for the more expensive packaged sugar assured in neighbouring Trinidad and Suriname.
GuySuCo will be able to acquire around US$650 per tonne of the packaged sugar in the regional neighbours, the CEO said.
GuySuCo also has been lucky to nail down another significant European customer… Italy…which is contracted to take up to 4,000 tonnes and is willing for more, the official said.
Another significant move by GuySuCo to reduce costs is the use of bio-fertilizers.
According to the CEO, the industry spends about US$15M ($3B) annually on importing fertilizers. It is the hope to half this cost.
Already, GuySuCo has started using the cheaper bio-fertilizers on every estate with 50 hectares being used under a pilot project. Once the project proves successful, the use of the bio-fertilizers will be increased gradually throughout the industry, Singh said.
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