14 potential investors briefed on privatization of three closed sugar estates

Oct 02, 2018 News

bid submission extended to October 31

One of the performing estates: Albion, Region Six

Fourteen potential bidders have met a privatisation team on the three closed sugar estates that are up for divestment and privatization, as the process winds down to submissions of critical documents outlining offers.

According to the National Industrial and Commercial Investments Limited/Special Purpose Unit (NICIL/SPU), on Tuesday, September 25, 2018, a meeting was held at the Marriott Hotel with potential bidders for the three sugar estates the Government of Guyana has agreed to privatize and divest.

The estates are East Demerara Estates (Enmore); Skeldon Estate and Rose Hall Estate.

The meeting was convened by the privatization team led by Wilfred Baghaloo from PricewaterhouseCoopers, Jamaica.

According to Baghaloo the purpose of the meeting was to hear the concerns, questions or any inhibitions from the potential bidders so that they can be addressed to ensure a successful privatization.

The 14 potential bidders came from Guyana, Trinidad and Canada.

Also there were SPU’s Head, Colvin Health-London; NICIL’s Chief Executive Officer; Horace James; and external counsel, Devindra Kissoon of London House Chambers.

The bidders posed a series of difficult questions to the privatization team.

NICIL/SPU disclosed that among the concerns were the status new regulatory environment/framework required to facilitate fair competition between the Government and private sector in an industry that was predominately led by the Government.

Also discussed were the taxation benefits and exemptions that the Government will provide in the risky and challenging industry.

The potential bidders also wanted information on Government’s energy policy and possible assurance that new products especially ethanol and electricity can be guaranteed in a market through public policy.

There were also discussions on the tenure/duration of the leases and about work permits.

The potential bidders were also briefed about the evaluation criteria to be used to select the preferred bidder.

“The potential bidders were extremely concerned about the state of the equipment and factory and whether they are being asked to buy essentially scrap metals,” NICIL/SPU disclosed.

On the issue of the continuing operations of the factories, Baghaloo said: “The government has gone through great pain to have a scheduled reopening of all three factories. East Demerara Estate operated in the last crop and I understand that Skeldon is now being prepared to reopen in November.”

In respect of Rose Hall, the PriceWaterhouseCoopers official said that preparations are being made to open operations in first quarter of 2019.

“I fully understand your concerns…Buying a factory that is not a going concern and most importantly a factory that has been closed for a long period of time (is not an option).”

On the matter of the evaluation criteria, it was explained that a technical proposal will carry 70% of the score and the remaining 30% will focus on the price and economics to country.

Baghaloo said: “The primary objective of the government is to get a qualified, experienced, competent and a well structured proposal to operate the factories for the foreseeable future and that is why the technical component is more weighted in the scoring process.”

According to NICIL/SPU, many potential bidders requested an extension of the deadline, which was initially set for September 28, 2018.

After hearing the many requests, the privatization team agreed to extend the bid submission date to October 31, 2018, which many other bidders thought was too short.

Baghaloo said, “We would have to evaluate the status and options as we get closer to the bid date but the primary concern was to ensure there was a level playing field particularly for those who showed interest in early stage of the privatization process.”

There are also a few major offers to buy the three estates, from the Middle East and India.

A Saudi Arabia group has reportedly also teamed up with a local food company, offering to buy the six estates, including the three operating ones.

NICIL/SPU had a meet and greet with the prospective investors at the recently renovated SPU LBI staff compound.

The sugar industry has been on a rapid decline in the last decade and half, requiring billions of dollars annually from government in bailouts.