Govt assumed $63b debt from four investments, Auditor General says

Wednesday, January 14, 2015 | 8:31 AM, Source - Jamaica Observer

KINGSTON, Jamaica – Since July 2010, the Government has assumed debts with outstanding balances totalling approximately US$550 million or J$63 billion from four public entities.

The entities are: the Sugar Company of Jamaica (SCJ), July, 2010: Air Jamaica, March, 2012; Wallenford Coffee Company, September, 2013; and Clarendon Alumina Production (CAP), March, 2013.

In addition, while the government has not assumed the loans of the Highway 2000 toll road operator, National Road Operating Construction Company (NROCC), it has started servicing them.

This was revealed by the Auditor General, Pamela Monroe Ellis, in her latest report which was tabled in the House of Representatives, Tuesday.

Parliament recently approved the government’s assumption of $27 billion in debt owed by CAP and Wallenford Coffee.

In Ministry Papers tabled in the House last July, Minister of Finance and Planning Dr Peter Phillips, reported that the administration was assuming approximately $24 billion owed by CAP to the PetroCaribe Development Fund (PCDF), and approximately $3 billion owed by Wallenford to the same fund, as well as to the National Export-Import Bank and the European Investment Bank.

Dr Phillips said that the Government's objective is to divest or lease CAP, which has been financially burdened by a fixed price forward-sale contract with Glencore which has cost taxpayers some $30 billion since 2002. However, preparatory to divestment, the Government is seeking to remove the debt obligations of CAP to facilitate a debt-free divestment entity.

Following a bidding process in September, 2013, investor Michael Lee-Chin's Portland Private Equity/AIC Caribbean Fund (PPE/AIC) was named preferred bidder for Wallenford's divestment. A term of the divestment agreement required that his PPE/AIC acquire all the shares without equity debts. PPE/AIC however agreed to capital investments in the WCC of US$23.5 million, in line with a four-year development plan.

NROCC has a 70-year concession from the Government, under the Toll Roads Act, to establish and operate Highway 2000. However, it has long-term liabilities of over $55 billion, including loans from the PetroCaribe Fund totalling over US$80 million.

Balford Henry