The agreement between Marriott developer Atlantic Hotels Inc (AHI) and the still unnamed investor for the completion of the US$58 million hotel is a privatisation deal and therefore not subject to the Procurement Act, according to AHI Director Winston Brassington.
In an interview with Stabroek News yesterday, Brassington disclosed that the government’s 1993 Privatisation White Paper is being used to govern the transaction with the investor,
who will be responsible for US$8 million out of the US$12 million equity stake in the project.
With the National Industrial and Commercial Investments Limited (NICIL) providing just US$4 million towards the equity, the unnamed investor is the majority investor.
Critics have long argued that NICIL’s procurement of goods and services should be governed by the Procurement Act, in particular to ensure transparency. And until financial closure, the AHI, which was incorporated for the specific purpose of pursuing the development of the Marriott project using the public-private partnership model, will continue to be owned by the Government of Guyana through NICIL.
Former Auditor General Anand Goolsarran said that to the extent that funds from NICIL are meant for the public purse even though they do not get transferred there is reason enough for the Procurement Act to be the mechanism used for the Marriott transaction. He said that if funds are received from the Treasury for a specific procurement, then the corporation or other body shall be obliged to follow the procedure set out in Procurement Act and the regulations.
He noted that the Procurement Act provides for public corporations and other bodies, in which controlling interest vests in the state, to, subject to the approval of the National Board, conduct procurement according to their own rules and regulations, except to the extent that such rules and regulations conflict with the Act or the regulations, in which case the Act and the regulations shall prevail.
‘One form of
privatisation’
When asked whether the transactions should not be governed by the Procurement Act, Brassington said that the transaction is akin to a privatisation albeit through transfer of equity and as such, it is properly carried out under the mechanism provided by the Privatisation White Paper.
“Public-private partnerships are actually considered to be one form of privatisation. We generally adhere to the principles of transparency and public advertisement. The Procurement Act is not specifically applicable in this situation. What we did is consistent with the Privatisation White Paper,” he said.
“This project has been on the cards for a while and these issues and the manner in which we are doing it has been in the public domain for quite a while,” he added.
Brassington yesterday remained reticent about revealing the name of the investor, saying that financial closure must come first. This he expects will be before the end of the year.
“We started this process in early 1999 when we put out an advertisement inviting anyone who was willing to partner with us in developing this public-private partnership in an open and transparent manner. Our privatisation rules provide that if after you’ve advertised you haven’t received any expressions you can negotiate with the first party that approaches you,” he said.
“In this case we advertised extensively… we sent packages to all of our embassies and consulates abroad. We sent packages to our foreign missions in Guyana with the whole objective of finalising an investor who would be interested in pursuing the project in accordance with the framework that we advertised,” he said.
“We finally got an investor who showed interest through one of our international embassies. The investor was referred to us and based on that we were able to negotiate and execute the necessary agreement to basically have an investor agree to put in US$8 million within the structure,” he said.
“That investor–and it is a substantial investor–has said to us that when the transaction is completed he is willing to have the details of the transaction made public. But because there is always that risk that the transaction may not be completed they did not want to submit themselves to that disclosure until the deal is completed,” he said.
“The investor came to us as a result of one of the packages we sent to one of our overseas embassies and consulates. We did not know the investor. All I will say is that the principals are substantial investors,” he said.
‘Comfortable’
He said that the transaction has a number of conditions precedent, one of which is that the investor has to be approved by Marriott International. He said Marriott was given a profile of the potential investor and it carried out its due diligence. He said Marriott approved the investor a few months later and signed an amendment with AHI to have the new investor come on board. Brassington said too that in similar fashion, Republic Bank Trinidad hired an international firm to do a due diligence on the potential investor.
He said that another conditions precedent include a legal agreement with Republic Bank Trinidad for debt financing. “Naturally the equity investor is putting part of the financing. The equity investor wants to be comfortable that the remaining money for the investment is also forthcoming,” he said.
“Once the conditions precedent are met–and we said we expect all of these conditions precedent to be met before year end–we will complete our transaction with the investor. The investor will wire the money to the account. We will transfer the shares to the investor once we receive the money. The deal will be considered to have been completed and we will make the details of the investment public,” said Brassington.
