Deep worry over Skeldon…Factory falls from savior to bandit– GuySuCo admits

Oct 15, 2017 News

---

The Guyana Sugar Corporation (GuySuCo) has defended the decision to put the Skeldon

estate up for private investments.
On Friday, Deputy Chief Executive Officer, Paul Bhim, made it clear that the state-owned corporation simply does not have the money to improve the fortunes of Skeldon, the country’s newest sugar factory.
Commissioned in 2009, the Chinese-built factory never made it off the ground. There was one technical problem after another. There were issues with the dumper, which transfers canes from the punts to the factory.
Then there were problems with the boilers. This year, just eight years after being commissioned, the factory was not allowed to grind for the first crop because of major safety issues with the boilers.
Emergency works had to be conducted and grinding has started for the second crop, but production is still way behind targets.
Bhim disclosed that for the project, while US$112M was plugged into the factory and another US$6M for the dumper, the rest of the budgeted US$200M, some US$80M-plus, was supposed to expand the cultivation of Skeldon estate, including making the field mechanical harvesting-friendly.
The failure of the Skeldon project had been a major embarrassment for consecutive administrations of the People’s Progressive Party/Civic (PPP/C).
Questioned Friday during a press conference, Bhim, who is also the Finance Director of the troubled corporation, said that the factory currently requires another US$15M to fix major problems.

The problems would not stop there. A major “chunk” of the monies would have to go to completing the conversions of cane fields. Without the converted fields, repairing the factory would be pointless as there would not be enough cane to feed the factory which has capacity to grind up 350 tonnes per hour.
Still, tens of millions of dollars more would have to go to purchase new equipment for harvesting, including tractors.
Under the US$200M Skeldon project, which was the brainchild of former President Bharrat Jagdeo, GuySuCo was supposed to raise the monies for the field conversion from the sale of lands. GuySuCo never got around to that.
The Government of Guyana has been forced to take over the Skeldon loans.
According to the Deputy CEO, the problems with Skeldon have been known for a while.
Bhim’s disclosure about the troubles of the factory and the billions of dollars it would take to fix the cane-fields at Skeldon estate would come at a time when Skeldon, Enmore, Wales and Rose Hall have been put up for divestment and privatization.
Skeldon, especially, would be a major headache for divestment or privatization. The administration has established a special unit which has started to advertise for investors.
The cash situation of GuySuCo had forced the government to assume the payments of the loans that were taken for the project.
Of the US$112M, some US$56M came from World Bank; US$32M from the Export-Import Bank of China and US$24M from the Caribbean Development Bank.
Bhim acknowledged that Skeldon’s investments would be quite costly given that GuySuCo is without any means to get it done.
The official pointed out that GuySuCo’s woes in the mid-2000s were compounded by the 2005 floods which devastated East Coast of Demerara. At the same time, the European Union prices went down, with production falling from 300,000 tonnes of sugar to 245,000.
This year, the industry is targeting a miserly 160,000 tonnes.
Bhim said that the problems all came at the same time when GuySuCo’s liquidity began to slide.
Skeldon, initially hailed as saviour, is now being blamed for draining the little cash that GuySuCo had.
Already, this year, GuySuCo has received up to $9B from Government in bailout money with $2B recently handed over in a lands deal with the Central Housing and Planning Authority (CH&PA).
In 2015, the corporation, which has over 16,000 workers on its payroll, received over $12B in assistance with $11B released last year. This year it was $9B, excluding the $2B housing lands deal.
GuySuCo is hoping to collect another $2.5B this year from more sales of land. Those transactions involving lands would continue next year and the following one.
According to Bhim, annually GuySuCo has other recurring costs, like $2B on fertilizers, $2B on fuel, and around $1.3B on freight and shipping. The cost of transporting workers is also a healthy chunk at $1.4B.
The figures of GuySuCo would be nothing to smile about either. In 2015, labour costs of $21.4B outstripped revenues of $19.6B.
Last year, revenues were a little better at $20B with labour costs $18B.
This year, while projected revenues are expected to be $17.4B, labour costs will be higher at around $18B.
As part of its reorganization to make GuySuCo profitable again, the Coalition Government has already closed Wales estate, and has started the process to do the same with Rose Hall, in East Berbice, and Enmore, East Coast Demerara.
There is an idea to slash the workforce of almost 17,000 workers down to 10,000, GuySuCo said on Friday.
The administration has been battling with the Opposition- the People’s Progressive Party (PPP).
PPP’s senior officials include top union representatives of the sugar unions.
Sugar, despite its heavy losses over the years, has been the top earners of foreign currency behind gold and rice.

---

---