A day after Minister of Finance Chris Sinckler delivered some sweet news to sugar farmers who have been awaiting pay, a major partner has threatened to pull out of Government’s proposed $250 million Cane Industry Restructuring Project (CIRP) which is now in danger of collapsing.
Inter-Sugar Partnership (ISP), the company appointed by Government in February 2015 to facilitate external financing for the project, made it clear today that it would stop further funding of the multi-purpose sugar factory at Andrews, St Joseph – a key component of the CIRP – if the Freundel Stuart administration did not meet certain obligations by the end of June.
Director of ISP Edward Marston claimed that Government was to infuse millions of dollars as partial equity and to grant a number of concessions but had done little because the project was not a priority.
Marston warned that unless things changed within the next “three to six months” his company would stop investing its money in consultancies and preparation of the old Andrews Sugar Factory site, where construction of the new state-of-the-art plant was expected to begin next year.
“The obligations are in financial terms, to inject 27-and-a-half million Barbados dollars as quasi equity to the project and to provide various release from import duties and other concessions which are necessary tax concessions for the project to enable that to go ahead. And on the practical side, to facilitate the granting of planning permission and the granting of a licence for the production of electricity by the new multi-purpose factory.
“The Government has paid a small amount on account of its financial commitment and that amount is now fully expended by ISP on the work it has been undertaking over the past year. The Government has applied money which it has acquired from other sources to various other projects which it has put as a higher priority than this project. As a result of that, I think basically, it has decided to put this project on the backburner,” contended Marston, who will fly in from his British base on Tuesday to attempt to resolve the outstanding issues.
He said ISP’s funds had gone into various areas of the project, including negotiations with the main engineering, procurement and construction contractor for the production of all the plans and negotiation of a commercial contract for the agreement.
The ISP director complained that “substantial payments” had been made to South African consultants BOSH Project who have been working on the plant “directly and indirectly” for up to six years.
“But to be honest with you, that cannot continue . . . and from a business standpoint, I can certainly not sanction continued expenditure on the project unless and until the Government is willing to honour its obligations.”
The top sugar advisor also cautioned that if his company were to pull its financing, it would be difficult for Barbados to source foreign funding for the multi-purpose factory, which is expected to produce special sugars, as well as molasses for the lucrative rum industry, and generate “green” electricity from bagasse and biomass for sale to Barbados Light & Power Company Limited.
Marston said negotiations with Japanese investors fell through three years ago because the Japanese Bank for International Cooperation felt that the country risk for Barbados was too great, adding that the situation had not improved.
“Since that time I believe it has become progressively more difficult because the commercial rating for Barbados as a nation has not improved since that time . . . . In fact, it has got progressively worse. It is now rated as B with a negative outlook, which is pretty much junk and junk status. It would be extremely difficult to find external finance on the capital markets for a country which is rated as low as Barbados.”
Just yesterday, Sinckler said careful studies would have to be done to determine the future of the sugar industry. However, Marston argued that the Minister failed to state “a well known fact” that such studies had been undertaken for more than 20 years with large amounts of tax payers money invested in consultants’ fees.
Marston added that the studies culminated in the formation of the Barbados Cane Industry Corporation (BCIC), as well as the Cane Industry Restructuring Project (BCIRP), which was first approved by Cabinet in 2012 and further endorsed in May 2013, when Government approval was given for the provision of advance funding.
Meanwhile, Sinckler’s announcement yesterday that cane sugar farmers would get their 2015 incentive payments of $15 million in two weeks, was welcomed by Chairman of the Barbados Sugar Industry Limited (BSIL) Patrick Bethel.
However, Bethel, whose organization represents the independent farmers, told Barbados TODAY he hoped the money would “materialize in time” because late payments in the past had prevented planters from carrying out a number of operational practices.