It is time GuySuCo focuses on becoming Guyana’s clean and green energy company

Oct 15, 2020 Letters

---

DEAR EDITOR,

As the Guyana Government contemplates the reopening of shuttered sugar factories, one understands that it is not an economically feasible determination but a largely social accommodation. Yes, revenues from the exponentially growing economy can be spent on social programmes to ensure a better life for the redundant sugar workers and understandably so.
The failure of the current sugar industry business model across the Caribbean is quite apparent if one takes a cursory look at the functioning remnants of the industry. Just look across the Caribbean and you will see the carnage that has taken place in the shuttering of sugar factories. Jamaica has only two of nine factories in operation after two spates of privatization, which were sweetened by generous tax concessions and lots of EU money poured into a Cane Expansion Fund and generous EU budget supported activities. There is every indication that only one factory will remain operating in Jamaica at the end of this year. The cessation of the EU preferential sugar market on October 1, 2017 made it untenable for the high cost producers to continue operating; they ceased production. Surprisingly even Appleton Estate, the home of that great Appleton rum now owned by Campari International Ltd just closed their sugar operations. In the other Caribbean locations, Belize Tower Hill factory which produces added value electricity and plantation white sugar is the “success” story along with Worthy Park in Jamaica and Portvale in Barbados. In summary, the enduring aspects of the industry is valued-added branded packaged sugar sold locally in the countries and exported to other islands and overseas markets and the rum distilleries that continue to grow and expand.
From the 2000’s, Guyana conducted detailed and well documented feasibility studies and followed the lead of Belize but in a more ambitious stance and built a new state-of-the-art factory with production capacity of 116,000 tonnes sugar per year at Skeldon (the estate that historically had the best tonne cane per tonne sugar TC/TS). The plant boasted the first diffuser in the Caribbean and was to produce value-added products; plantation white refined sugar, ethanol and cogenerated electricity. The project was a colossal failure both financially and psychologically and pushed GuySuCo into a state of suspended animation and may have contributed to the indecisiveness in shuttering the uneconomical higher-cost factories within the group and the attempts to sell the remaining factories including Skeldon to a market that does not exist. The company plunged further into debt as a result of production shortfalls, reduced revenues and higher production costs. GuySuCo then consolidated the remaining estates with good potential for development and kept the lower cost factories Albion, Blairmont and Uitvlugt in operation. The revenue shortfall continued to plague the industry and this was exacerbated by untimely delivery of cash flows which is incongruous to any agricultural operation. Projects held in abeyance are a plantation white refined sugar plant and cogeneration power plants. Marketing and sales of branded and packaged Demerara sugar is proceeding but a more aggressive marketing strategy may improve market share. The sustained accumulated debt racked up by GuySuCo is sufficient evidence of an industry that is on an expired life cycle.
Business pivot
Guyana must find a more disruptive technology and sustainable business model. The pivot to new markets, products and or services must substantially expand revenues and be built on the existing foundation of GuySuCo. Bookers Sugar Estates, which later morphed into GuySuCo at nationalization was noted as the region’s lowest cost producer and a bedrock for training and development of artisans and professional managers. These are the core competencies that need to be recalibrated, transformed and realigned towards a new mission and vision. Clean and renewable (Green) energy presents that opportunity.
The Guyana’s Green State Development strategy projects that agriculture of which sugar is a major contributor makes up about 25% of the GDP and the modelling predicts that agriculture will in future contribute 40% of the country’s GDP. However, it is recognized that such dramatic change in added value from agriculture will require substantial capital investments; this projection conceptually fits into the new business model for the clean and green energy industry. The technology is available to make the change but engineering redesign of the plants will require much work to move away from the Back-Pressure turbines and low-pressure boilers to Condensing Extraction turbines and high-pressure boilers fuelled by clean fuels and biomass such as natural gas and bagasse. It is time to focus on becoming “Guyana’s Clean and Green Energy Company.”
Guyana will develop a Clean and Green Energy industry and make sugar a by-product of the re-engineered business process. Revisit the “Green State Development Strategy: 2040” (2019) consultancy group and find a pathway towards actualizing the stated strategy. The Green State Development Strategy is a key reference document that provides a strategic direction to a new green economy, the implementation of which will require massive capital investment, new investment models and will provide new exciting higher paying jobs for Guyanese.
The combined heat and power (CHP) plant will operate all year round and provide steam to the factory. Bagasse from the factory will be dried and fed into the boilers meeting the characterization of Green Energy. A 90 MW power plant can add over US$80M in revenues annually. When the plant is supplying steam to the sugar factory, it will be operating at 90% efficiency.
The fact is that agricultural industries in particular sugar with a crop growth cycle of nine months cannot operate on cash flows that do not match its production/cash flow demand cycle. Any protracted disruption in the supply chain creates mismatch in cash flows and will wreak havoc on critical time sensitive inputs such as fertilizers and factory spare parts, etc. and lead to a significant decline in quantitative and qualitative efficiencies.
In June 2020, I attended a Green Institute Webinar forum entitled The Resource Curse and Democracy: Lessons for Guyana presented by Prof. Michael Rosson which helped to crystallize my thoughts on the approach to Guyana economy diversification. This has led me to believe that a comprehensive programme built around the core competencies of GuySuCo can provide the basis of an expanded sustainable development programme. However, from information gleaned from scanning the many online reports, the entire industry needs to be restructured and realigned to recreate a new integrated technological, financial investment and governance framework.
Engineering design needs to be done to match the power infrastructure with the sugar market demand, sugarcane requirements, the steam flow and ethanol product flow streams. This is not an abstract idea but comes out of my years of proven technical performance record and business development expertise within the industry and my relentless pursuit to find a sustainable solution to factory closures in Jamaica, St. Kitts and Guyana. But we must remember that it is the market that determines the existence of businesses and it is the cost of production versus price and quantity of products that determine economic viability. If electricity and input supplies become the main product/service, there is a ready and expanding market and the current sugar operations already have these basic technologies and capacity to build a skilled workforce within its power generation systems. Additional revenues from the sale of bagasse to the power plant will provide financial resources to help stabilize the agricultural operations. Branded and Packaged sugar Demerara or plantation white refined and bagged sugars will add revenues for premium products. In view of the contraction of the Caribbean sugar production, the arising market opportunity must be re-evaluated along with the work done by the Sugar Association of Caribbean, Caribbean Development Bank and COTED around the tariff space facilitated by the CET to arrive at a new collaborative market potential with Belize. Excess sugars can be converted into ethanol to supply the local E10 fuel market.

Yours faithfully,
Gordon Alert (BBA, MMI)
Sugar Technologist, Business and Management Consultant

---

---