The future of the Guyana Sugar Corporation (GuySuCo) hinges on a government bailout as the corporation faces possible closure having exhausted its finances and is now desperately seeking support from the Government.
This is the exact situation GuySuCo had found itself in when the APNU+AFC government took office in May, 2015.
Within the past months, Stabroek News had reported that the company has found itself in a financial crisis and was uncertain how it would meet its payroll requirement.
In a press release yesterday, the Guyana Agricultural and General Workers Union (GAWU), the main sugar worker’s union said Chairman of the Board of Directors John Dow has written to the president seeking an urgent bailout to alleviate the crisis the corporation is in.
The union said that in a letter dated May 15, Dow appealed to President David Granger “… to use your good offices to arrange for funding to prevent the impending closure of the Industry.” In the letter he also said that GuySuCo needs funds now to be able to survive after the second week of June 2020.
Corporate Communi-cations Manager, Audreyanna Thomas, when contacted yesterday acknowledged that a letter was indeed sent to the President explaining the company’s financial standing but said she was not advised as to whether a response was received. She added that the company is currently looking at the situation and is brainstorming to find a solution.
According to the letter seen by this newspaper, the chairman of the board went into detail on the “dire” situation in the industry to President Granger.
“Our Finance Department estimates that the Corporation is expected to be out of cash by the 2nd week in June and until then we can only afford to meet labour, fuel and cane farmers’ payments and the bare essentials (labour transport, lubricants etc),” he highlighted, before stating that cash will not be available to meet “any outgoings for spares and materials for the mid-year Out-of-Crop maintenance of our factories.”
“This inability to purchase spares and materials is likely to result in factory performance in the 2nd Crop 2020 being adversely affected with increased factory downtime, reduced sucrose extraction at the milling plant and lower sugar and molasses production,” Dow informed the President in a letter he says he was mandated to pen as a result of a decision taken at a statutory board of directors meeting.
With a backlog of $2.1 billion owed to creditors, Dow said creditors are unlikely continue to grant further credit.
“Our inability to pay creditors in time has resulted in many of our most experienced contractors being unwilling to tender for GuySuCo projects, and creditors have been demanding large up-front payments before supplying goods,” Dow explained.
A source told Stabroek News the current financial crisis also prevents them from accessing loans from financial institutions as the four estates which were closed under Granger’s administration remain a liability to the corporation.
According to the source, the corporation’s potential to access these funds is severely hindered as these estates’ liabilities remain on their books while Government’s holding company National Industrial and Commercial Investments Limited (NICIL), Special Purpose Unit (SPU) would have absorbed their assets.
“The liabilities of Wales, Enmore, Rose Hall, [and] Skeldon Estates needs to be removed from our books as this has put GuySuCo in a bad position to access financing to advance our business as it shows we are still bearing all the financial obligations for these estates. NICIL needs to accept these liabilities as they did with the assets. If that is done, GuySuCo will be in a better position to possibly access finances for the three estates,” the sources said.
Dow told President Granger that despite improvements in the productivity of cane, GuySuCo’s sugar production for the last two crops has fallen short of expectations and the current Covid-19 pandemic has exacerbated the problems experienced in meeting the 1st Crop 2020 production targets.
He noted that as a result, the cash generated from operations cannot meet any outgoings particularly when external funding has been difficult to obtain.
The industry-wide production of sugar currently stands at 36,591 tonnes from a target of 42,247 tonnes.
With 5,656 tonnes still to be produced, it is unlikely that the producing estates Albion and Blairmont will be able to reach their targets. The crop season which has been extended is expected to conclude shortly.
Business Plans
Dow further outlined that GuySuCo’s business plan calls for much needed investment for critical equipment and infrastructure works to secure the future of the corporation. He added that the cash generated from current operations cannot finance these future projects.
He lamented that talks between NICIL/SPU and the corporation remain in deadlock as the holding company for government assets remains unmoved and unwilling to release any funds to advance and develop the industry.
“Recent interactions [GuySuCo/NICII-SPU] indicate that little or no further funds are likely from this source in the near future,” Dow said as he made reference to the $30 billion bond being held by NICIL.
To date, GuySuCo, he said, has only expended $9.639 billion from the NICIL/SPU bond and to their understanding only $17 billion has been raised.
The chairman of the board further lamented in the letter that GuySuCo has, since January 2019, been urging NICIL/SPU to change the purpose caveats of the Bond to be in line with corporation’s requirements But to date, NICIL/SPU has been unwilling or unable to facilitate the request.
“The Bondholders, without a change of caveats, have apparently been insisting that no further disbursements be made from the Bond as GuySuCo’s requests do not fit the stated purpose on which the Bond was raised,” Dow said.
He further highlighted in his letter to the president that, “NICIL/SPU has been selling GuySuCo’s assets from the closed Estates – scrap iron, tractors, punts etc. GuySuCo, although having requested to be granted first refusal on the sale of any assets, has not been afforded the opportunity. Furthermore, GuySuCo has not received any accounting of the sale of these assets, although this was requested. N1CIL/SPU merely states that these are now their assets and the funds from these sales are being used to repay the Bond.”
On this note, Dow said the question has to be asked “Why should GuySuCo have to fabricate new punts and purchase new tractors when these items of equipment are being sold to others without GuySuCo being given the opportunity of first refusal?… the Bond has been the only source of funding [for] the Corporation’s priority programmes.”
He told the President that the current estates – Albion, Blairmont and Uitvlugt – in 2015 were in dire need of upgrades and that considerable sums of money were required to fix the deteriorated infrastructure in the field bridges, dams, revetment repairs in particular and to provide for replacement equipment in both field tractors, drain-digging equipment etc and factory pumps, motors etc. He explained that considerable sums were, and still are, required as a result of the neglect to provide the routine capital required for many years prior to 2015.
Dow requested that a subvention be made available in the 2020 budget. Nonetheless at the same time he requested that the president through his office arrange for emergency funding to sustain the industry beyond the second week of June 2020.
Dow disclosed that two accountants on the corporation’s Board of Directors, Ramesh Persaud (Vice-Chairman) and Paul Cheong “felt obliged to resign” due to the financial position of the company.
The GAWU, through its representative on the GuySuCo Board, has learnt that the President did not respond to the Corporation’s request, the release said.
For the thousands of Guyanese who directly and indirectly still depend on the sugar industry for their livelihoods, this is most disturbing news at this time, the union said.
Meanwhile, Thomas told Stabroek News the revenue generated from the sugar production during this extended crop season has helped the corporation to meet its wages and salaries obligations. However, she noted that July might be troubling if funding is not found to keep the industry alive.
With a lack of finances, she also said that they will not be able to prepare fully for the second crop as limited finances will hinder land preparation and planting activities along with needed maintenance of the factories.
White sugar production
Meanwhile, she explained that the company has been continuously forging ahead with the plan to become a white sugar producer by 2022. However, she noted that much investment infrastructure and other capital investment is required.
GuySuCo’s plan is to covert the Albion Estate to white-sugar production and as such machinery will have to be reconfigured to not only meet industry standards but to also produce a high quality product. Investment in the variety and yield of cane produce will also be necessary.
Thomas further explained to Stabroek News that there is a large regional market for white sugar which they are looking to tap into and discussions have already begun with the Department of Foreign Trade and the Caribbean Community Council for Trade and Economic Development.
Thomas also acknowledged that the local market has played a vital role in GuySuCo’s sustainability by purchasing the products produced and packaged by the corporation.
On this note she said that they have been able to expand their supply of the Demerara Gold sugar and introduce a new brand of sugar – Enmore Crystals – into the market.
