Estwick gives the answers
Yesterday, guest columnist small farmer Ronald Beckles put a number of questions to Minister of Agriculture, Food, Fisheries and Water Resources Management Dr David C. Estwick regarding the Andrews Project and the Barbados Cane Industry Restructuring Project (BCIRP). Today, we bring you the minister’s responses.
Dr Estwick seems to be blaming his Cabinet colleagues for causing the failure of the Andrews Factory project to start.
Delays have dogged this project since Cabinet gave its approval in May, 2013, to a scheme which would have seen a new multipurpose factory built by Japanese company Marubeni, with funding from the Japanese Bank of International Co-operation and commercial banks. Cabinet’s approval was given after reviewing the business plan and financial model, which was also made available to the Central Bank.
The challenge for me has been to hold the project together in the face of a worsening national economy, resulting in a further three-point downgrade by Moody’s in June, 2014, and a downgrade by Standard & Poor’s in December, 2014.
Dr Estwick is quoted as saying that the Ministry of Agriculture has agreed to shift the venture from a mere public venture to a public-private partnership with the St Lucian-based Inter-Sugar Partnership Ltd (ISPL) identified as the private entity that will manage the project for a period of time, and then lease it back to the Government.
The present rating of Barbados’ country risk has created a barrier to raising foreign debt finance for public capital projects, which is now effectively insurmountable. Financing can however be obtained where the borrower is a private entity and the project is financially viable. This has led to the need for the project to be restructured as a PPP.
ISPL will undertake construction of the new factory at risk and, once the facility has been commissioned, then the right to operate will transfer back to the public sector, namely Barbados Cane Industry Corporation (BCIC). ISPL was formed by consultants from Britain as a special purpose vehicle to bring together skills and experience thought necessary by the Government to bring to fruition a project which has been under discussion
for many years.
For the past two years, ISPL has been working with the Barbados Cane Industry Corporation and Bosch Projects of South Africa to take the project forward. The essential character of a PPP is that it avoids the cost of project financing being “on balance sheet” for the Government and provides the opportunity for selected projects to be undertaken despite Government’s inability to fund them directly.
Where is the feasibility study? I ask that it be published now.
The business plan, including detailed financial model, has been with the Government and Central Bank for over a year. Owing to the sensitivity of this material, the outcome of the project would be jeopardized by its being placed in the public domain.
Where is the Environmental Impact Assessment (EIA) for this project?
The EIA has been carried out by a global consultancy with expertise in working to World Bank standards. The final report will be issued to the project financiers and the Town & Country Development Planning Office, the latter as part of the requirements for securing planning permission. The EIA report will be published when completed.
There has been no properly convened public meeting.
A properly convened community meeting was held at St Anne’s Anglican Church, Parris Hill, St Joseph, on August 15, 2013, to which the communities of Parris Hill, Fisher Pond and Sweet Vale were invited. That meeting was well attended. Details of the EIA and Social Impact Assessment in relation to the project were presented and discussed.
Concerns include pollution from a wood-burning electricity plant up against Parris Hill.
The plant has been designed to meet World Bank standards for the particulate content and volume of emissions. The prevailing wind would take emissions away from Parris Hill towards open fields to the south-west of Andrews.
What will ISPL get from providing its services?
All profits from the operation of the new factory will accrue to the Government of Barbados. ISPL will receive a fee when the project reaches financial close, which will be included within the project finance and amortised over the operational period.
Other professional fees will follow the provision of project management and other defined services as applicable.
Bajans will end up owing in excess of US$350 million.
The total borrowing authorized by Cabinet is US$270 million. The actual financed cost of the project is projected to be US$250 million, including interest during construction. Of this amount, the construction and engineering costs will amount to US$175 million, with the balance accounted for by new agricultural machinery, farm support, project overheads and accrued financing costs.