The Berbice Bridge Company Inc (BBCI) has written to the National Insurance Scheme (NIS) – the holder of $950m in preferred shares and other stakeholding, saying that it was unable to pay dividends for 2014 as it did not make a profit.
The NIS has been in a difficult financial situation over the last few years where expenditure has topped income and it would have found the dividends handy. Analysts say the BBCI disclosure raises the question of why the NIS was encouraged to invest in 2013 in the preferred shares when the fortunes of the Berbice Bridge Company were not that bright and a substantial return not guaranteed. Analysts note that the NIS could have parked the funds elsewhere with a guarantee of a return.
With the preferred shares, the NIS accounts for 76% of the shareholding in the bridge, billions of dollars that have not brought any return for last year. Poor investment decisions have long been a problem at the NIS.
In the December 29, 2014 letter to the NIS, BBCI CEO Omadat Samaroo said that he was writing on the direction of the company’s board to state that the company was in “no legal or financial position to declare and or pay dividends for the year 2014”.
He further said that BBCI’s statement of income was affected by the application of the IFRIC 12 Service Concession Agree-ment, part of the International Financial Reporting Standards. His letter did not elaborate on this.
The letter added that the directors and management are currently looking at new strategies to improve the company’s financial performance.
The sale of $950M worth of preferred shares by government holding company NICIL to the NIS was only revealed towards the end of 2013 when chartered accountant Christopher Ram had begun to raise questions about dividends to the government. NICIL which was holding the preferred shares had forgone hefty dividend payments from BBCI in favour of other private investors in the bridge.
With BBCI unable to pay dividends to the NIS for 2014 it would be the practice that no other investor would receive dividends.
From its inception, the bridge has been criticised for too-high tolls which were seen as an unvarnished bid to cover the rate of return that private investors expected from the bridge, to the detriment of users.