Newly appointed Chairman of the Guyana Sugar Corporation, Dr Clive Thomas believes that the US$200M Skeldon estate, inclusive of the US$110M factory is a special case that will need to be dealt with separately by the Commission of Inquiry (COI) into the sugar industry.
Stabroek News asked the economist his take on possibly moving toward decommissioning the Skeldon factory in the hopes of bringing down production costs which currently have GuySuCo producing sugar at US$0.40 per pound while sales are set at US$0.16 per pound. The average world market price is even lower than this. Skeldon’s cost of production is said to be significantly above US$0.40 per pound.
“You are pressing me hard on what we are going to do with Skeldon, but that will be a decision of the COI, but from my point of view personally and as chairman that is a outlier and has to be dealt with specially,” Dr Thomas told Stabroek News during a brief question and answer on Tuesday with various media outlets at the COI held at the Agriculture Ministry.
GuySuCo’s cost of production is heavily influenced by the Skeldon factory’s inability to produce the large amount of sugar that was promised by the government at the time of its commissioning in 2009 and at a feasible tonnes of cane to sugar ratio. Originally, Skeldon was supposed to produce 110,000 tonnes of sugar annually. For the 2015 first crop the Skeldon estate barely managed to produce 8,000 tonnes, missing its 17,200 tonne production target by more than half. The factory has also been riddled with costly problems.
Thomas said that during ongoing discussions with the various fellow commissioners, it had been decided that Skeldon was a “special case.”
The Chairman of the Board stated that the way forward and possible solutions for the Skeldon problem will be raised during the first meeting of the board slated for August 26.
Thomas said that the selling of the Skeldon cogeneration plant under the previous government was done without the permission of the board. He said of the estate, “one if its crucial income streams was in fact the cogeneration and that has been handed over without the permission of the board.”
He added that the sale of the cogeneration plant was “unauthorized” and “given” to the state holding company National Industrial and Commercial Investments Limited (NICIL).
In April, then CEO of GuySuCo Rajendra Singh and the head of the Privatisation Unit, Winston Brassington revealed that GuySuCo was selling its co-generation plant and three Wartsila power units at Skeldon to a state-owned company specially created for the purpose at a price of US$30 million. The cogeneration plant which uses bagasse to generate power has an installed capacity of 30MW.
The company, Skeldon Energy Incor-porated (SEI) is now jointly owned by electricity utility, the Guyana Power and Light (GPL) and NICIL. Cabinet approv-ed the sale as well as the Power Purchase Agreement (PPA). In addition, Brassington had confirmed that SEI will be managed by Finnish company Wartsila (Guyana) Inc which had already assumed management responsibility at the time of the press briefing to inform the public about the sale.
SEI was to be funded with equity financing of US$5M from NICIL and US$4M from GPL and US$21M in debt financing from GPL and local and international financial institutions. Repayment of the financing would be via the sale of power under the two PPAs to GPL and GuySuCo.
At the time, the sale was seen as a way to transfer large sums to the sugar company in the wake of the prorogation of Parliament. It had also come after failed attempts to have a huge sum transferred from the Guyana Geology and Mines Commission to the Central Housing and Planning Authority and then to GuySuCo.
Thomas said that the COI has been clarifying matters. “I knew how bad it was and I found it to be just as bad if not worse”, he said. GuySuCo’s Chairman stated that “we are dealing with a situation of great recklessness and we have to sort out all this out so we can move forward”. Thomas noted that a preliminary report will be completed by the COI within the next month and a half while the final report will be submitted by the end of the 90 days that the commission was given to complete its work.
Meanwhile, business magnate Dr Yesu Persaud, a one-time Deputy Chairman of GuySuCo told Stabroek News that to decommission the Skeldon factory would have the corporation facing additional costs to transport canes to the nearest estates. He stated that the infrastructure wasn’t there to do so. He noted that the old decommissioned Skeldon estate factory was not equipped with the required technologies. At this point there was little hope that the old factory could be used in an attempt to bring production costs down.
Persaud questioned the competence of the officials who would have checked the turn key factory after it was turned over to GuySuCo and the government by the Chinese contractor China National Technical Import and Export Corporation in 2009.
