Berbice Bridge tolls stalemate … Make agreement public, pay off private investors – Ramon Gaskin

September 16, 2015 | By KNews | Filed Under News, Source

Government should immediately move to release a secret concession agreement that allowed private investors to take control of the US$40M Berbice River Bridge.

So says economist, Ramon Gaskin, who yesterday also urged for the new administration to also take steps to regain control of the controversial structure- a critical linkage between East and West Berbice.

“This document has to be published. The people need to know the kind of arrangements that were made. The Berbice Bridge Act says that the concession agreement must not be made public but we cannot continue in this manner,” the outspoken commentator said yesterday.

Describing the deal as a “bad” one, Gaskin explained that the concession agreement, which was signed between the Government of Guyana and the Berbice Bridge Company Inc. (BBCI), spell out dividends and repayments, and toll rates which need to be examined.

With revelations in recent times that the previous People’s Progressive Party/Civic (PPP/C) government agreed to allow investors returns of up to 23 percent, the questions have been coming why such lucrative terms were even contemplated in the first place.

“Government should now move to pay off the private investors. It (BBCI) cannot remain a private company. We have to agitate for that concession to be made public. We also in the same vein need to have the details of the Marriott Hotel…and other projects disclosed.”

Gaskin also believed that all deals made with Government should, as a matter of course, be laid before the National Assembly.

BBCI is reporting accumulated losses of $1.5B at December 31, 2014.

Since its opening in late 2008, the bridge failed to attract the number of vehicles that were in the projections, BBCI claimed.

As a matter of fact, the company earlier this year, applied to the previous Government for an increase in tolls.

Facing the May 11th General Elections, the PPP/C administration did not consider the application.

The new David Granger administration, as part of its campaign promises, moved to have the tolls reduced, announcing a drop of car tolls from $2,200 to $1900 and 10 percent for all other categories.

However, the bridge’s Directors refused to implement the reductions saying that it needs to take the matter to its shareholders.

Tax Breaks
It started to unravel after then.

Guyana learnt that as part of the sweetheart deal, the Bharrat Jagdeo administration granted New GPC and other private investors sweeping tax exemptions on their returns.

BBCI is claiming imminent insolvency unless its tolls are increased or it is allowed to run the structure for 50 years, instead of the 21 years.

The 15 per cent and 23 percent return rates would contrast starkly against average rates of about 11 per cent 12 percent that normal investors earn from projects.

The Berbice River Bridge Act, assented to by Jagdeo in January 2006, was tailored specifically to ensure that profits were realized.

It allowed all income earned by the concessionaire to be exempted from Corporation Tax, Income Tax and Withholding Tax for 21 years. The act also allowed for all dividends payable to shareholders to be exempted from Corporation Taxes, Income Taxes and Withholding Tax.

While tax holidays have become a norm for investors, the guaranteed rate of return of 15 -23 percent would shed light on why a number of companies including New GPC and Queens Atlantic Investments Inc. (QAII) and Hand-in-Hand Insurance were so eager to jump on board.

New GPC and QAII are owned by Dr. Ranjisinghi ‘Bobby’ Ramroop, a close friend of Jagdeo.

The high returns are now being blamed on the current financial problems of the Berbice Bridge Company Inc. (BBCI).

The bridge company has been warned time and again that its high repayments to shareholders and debtors were highly unsustainable and could lead to problems.

The auditors, TSD Lal and Co., in its 2014 annual report, noting that the shareholders’ deficit was $1.1B, warned that the company would continue to make losses. “Continuation of the company as a going concern is dependent on the ability of the company to make substantial profits in the future and to generate a steady cash flow to meet liabilities as they fall due.”

No Dividends
The auditors went further. “We have considered management’s representation and have concluded that there is a material uncertainty that cast significant doubt on the entity’s ability to continue as a going concern and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business.”

BBCI has written to the state-owned National Insurance Scheme, asking for the 2014 dividends to be waived.

The Government of Guyana has been waiving its returns too after BBCI claimed it cannot pay.

The US$40M bridge was commissioned in December 2008 and was built largely under a private/public partnership from an overseas loan.

The financial structure of the company was deliberately done in a manner to allow the equity shareholders whose investment is less than five percent ($400 million) of the total funds of the company to exercise controlling interest over the company.

Of the $400 million, New GPC and Ramroop Group own 40 percent and the Hand-in-Hand Group 10 percent.

In effect, the bridge barely made enough monies to pay a few favoured investors, who stood first in line to receive their returns.

NIS has invested $950M in shares but had little say in the affairs despite the 76 percent stake.

The other equity shareholders are Secure International Finance Company ($80 million); Demerara Contractors Limited ($40M); Hand in Hand Motor & Life Insurance Company ($40M), and NIS ($80 M).

Critics were against the appointment of Directors of Ramroop and Hand-in-Hand who took control of the Board of Directors.

The bridge has been providing a critical link between the city and East Berbice, where thousands of rice farmers and sugar workers live.

Government, in face of the stalemate, has announced that it will be introducing river taxis to reduce costs for students and senior citizens.

Businesses in Berbice, unhappy with the monopoly control by the bridge company, have backed the introduction of the passenger speedboats.