IT is unfortunate that we are at this position vis-à-vis the Berbice River Bridge. As one of the authors of the original proposal sent to the AFC’s Leadership in 2011, recommending a motion in Parliament to reduce the Berbice Bridge Toll, I fully endorse the Motion piloted by Minister of State Joe Harmon, when he was an Opposition MP.For us to properly understand the philosophy behind what has to happen, we must contrast the difference between the provision of a public good vs. a private good. Public goods are priced not only in economic dollars, but also in social and political dollars.

In an environment where the Granger/Nagamootoo Government has committed to meeting the full cost for the reduced tolls, one wonders why the directors are being this difficult in executing this parliamentary decision? In finance, such a proposition is deemed CASH NEUTRAL? Failure to understand how important the social and political profits are to the new Government will be extremely costly to the directors and their financial sponsors in the future. It is time the directors take this company out of this untenable situation.

There are two issues here and therefore they should be dealt with separately. Issue one is a political commitment from the new Government to reduce the out-of-pocket tolls for the general public (fully funded from the treasury to the tune of some G$140 million). The reality is that this issue has zero impact on the cash flows of the company.

Then there is issue number two, which seeks to increase the revenue streams of the company following some model outlined in the ‘Concession Agreement.’ I was advised this proposal was submitted to former Minister Robeson Benn by the directors. The public utterance from the directors of the company suggests that this issue remains unresolved and thus is a matter for bilateral discussions with the new Government. But what the directors cannot do is hold a gun to the Government’s head on issue number one under the pretext that they have to conclude dialogue on issue number two. In some countries such public acts are treated as “Sabotage of the State.”

There is hope, but the directors of this company have to back down since they do not have the moral high ground. They will be held responsible for the consequences of their actions. Coercive action is still an option, although it is not on the table as yet, but any responsible Government has a right to protect the vital interest of its people. The United States, the leader of the free world, does it all the time, so I do not understand why people think a Government taking action to regulate the conduct of a business corporation in the provision of a public good is so wrong. The people’s interest is paramount on all scores.

THE BROAD NUMBERS
The Berbice River Bridge is a national asset that was priced at US$38 million (G$7,900 million). Legally, 80 percent of its common shares are owned by the private sector, but more than 74 percent of the finance came from the pockets of taxpayers and the workers (pension funds). So hiding behind the Berbice Bridge Act and Regulations is not an option for the directors. Today, the new Government faces an acid test. It is time for us to convert a lemon into lemonade.

But before we go any further, let us put some hard numbers on the table since from all the information released, it appears that there are only three classes of investors in this deal. But no one is considering the Gy$4.1 billion the Government pumped into this project before one pile was driven for this bridge. The taxpayers invested some Gy$2.2 billion to complete the feasibility study and a further Gy$1.9 billion to complete the access roads at both ends of the river to facilitate the timely opening of the bridge at Christmas 2008. Therefore, the State has a stronger position than some tend to think.

Let us now focus on the three classes of investors:
1. The ordinary shareholders basically own the company and have the last call on dividends if available. From all appearance, dividends are not expected to flow before 2021. The holders of the ordinary shares are: New GPC/Queens Atlantic (related to the Ramroop family) – $160 million, Secure International Finance Company (related to the Beharry family) – $80 million, Hand-in-Hand and Demerara Contractors (related to the DDL family) each holding $40 million and the NIS (the taxpayers) – $80 million. I was advised that the 20% NIS interest is currently being represented on the board by Ms. Gillian Burton-Persaud, (current PPP parliamentarian) and Mr. Maurice Solomon.

2. The preferential shareholders have first rights to dividends but do not have voting rights. I have been advised that the NIS has invested some G$950 million in preferential shares, but they have agreed to defer some G$300 million in preferential dividends since 2010. I can understand this decision since the greater good was being served – lower tolls for the general population. But in an environment where the NIS is technically insolvent, this situation has to be remedied soon. Alternative State resources from the Forestry Commission, Frequency Management Unit or the GGMC to buy out some of these preference shares from the NIS should be seriously considered.

3. The bondholders are technically the bankers who own the corporate bonds of some Gy$5,575 million. I was advised that the company paid some Gy$600 million in 2014 to the bondholders and is expected to pay the same amounts in 2015, 2016, 2017 and 2018. From 2019, the payment to the bondholders will shift to Gy$640 million annual; concluding in 2021. Who are the bond holders? NIS (shareholders). Who else? There are some related parties to shareholders – Demerara Bank (part of the DDL family), GBTI (part of the Beharry family), Hand in Hand (also shareholders), Trust Company (part of the DDL family), North American Life Insurance (part of the Beharry family), North American Fire Insurance (part of the Beharry family) and New GPC (part of the Ramroop family). Who else? All the other banks – New Building Society, Scotia Bank, Citizens Bank and Republic Bank. Then the pension funds -GGMC Pension Fund (state employees), GPL Pension Fund (state employees), GuySuCo Pension Fund (sugar workers), Hand In Hand Trust Pension Fund, GAWU Pension Fund (sugar workers), DDL Pension Fund, Neal & Massy Pension Fund and Geddes Grant.

THE OPPORTUNITY
I was advised that in 2014, this Bridge generated revenue of G$1,494 million (close to G$1.5 billion). Before 2014, the company was able to put away some cash resources to meet the future bond payments. However, with the bonds becoming payable since 2014, the company’s cash outflow has escalated at a significant rate to honour the financial commitment to the bondholders. The company is now claiming that they have to raise rates to remain solvent. Utter codswallop.

One factor is certain: this bridge has a monopoly on a growing revenue stream as a result of the increased traffic across the bridge year after year. Revenue there will always be once they have motor vehicles on the roads.
There is only one solution – the Government has to step in to reduce the weighted average cost of capital over the next five years by asking some of the bondholders for partial deferment and the NIS for full deferment.
The NIS should be allowed to sell its bonds to NICIL or GGMC. This will immediately reduce the immediate cash outflow and will put the company on firmer financial foundations with no need to raise tolls.
For those making the national sacrifice in choosing deferment in bonds, they should be offered a sweetener for choosing this option – a higher rate of return that they are currently eligible.
Solutions are there, but we must also understand that behind this whole situation are some invisible hands that are trying their utmost to embarrass this new Government. In this Guyana house, there is only one Government; not two. It is time. Can we do it; yes we can!
(Readers wishing to contact the author can do so via email at: sasesin1@yahoo.com)

source  - http://guyanachronicle.com/let...ooperate-for-guyana/

IT is unfortunate that we are at this position vis-à-vis the Berbice River Bridge. As one of the authors of the original proposal sent to the AFC’s Leadership in 2011, recommending a motion in Parliament to reduce the Berbice Bridge Toll, I fully endorse the Motion piloted by Minister of State Joe Harmon, when he was an Opposition MP.For us to properly understand the philosophy behind what has to happen, we must contrast the difference between the provision of a public good vs. a private good. Public goods are priced not only in economic dollars, but also in social and political dollars.

In an environment where the Granger/Nagamootoo Government has committed to meeting the full cost for the reduced tolls, one wonders why the directors are being this difficult in executing this parliamentary decision? In finance, such a proposition is deemed CASH NEUTRAL? Failure to understand how important the social and political profits are to the new Government will be extremely costly to the directors and their financial sponsors in the future. It is time the directors take this company out of this untenable situation.

There are two issues here and therefore they should be dealt with separately. Issue one is a political commitment from the new Government to reduce the out-of-pocket tolls for the general public (fully funded from the treasury to the tune of some G$140 million). The reality is that this issue has zero impact on the cash flows of the company.

Then there is issue number two, which seeks to increase the revenue streams of the company following some model outlined in the ‘Concession Agreement.’ I was advised this proposal was submitted to former Minister Robeson Benn by the directors. The public utterance from the directors of the company suggests that this issue remains unresolved and thus is a matter for bilateral discussions with the new Government. But what the directors cannot do is hold a gun to the Government’s head on issue number one under the pretext that they have to conclude dialogue on issue number two. In some countries such public acts are treated as “Sabotage of the State.”

There is hope, but the directors of this company have to back down since they do not have the moral high ground. They will be held responsible for the consequences of their actions. Coercive action is still an option, although it is not on the table as yet, but any responsible Government has a right to protect the vital interest of its people. The United States, the leader of the free world, does it all the time, so I do not understand why people think a Government taking action to regulate the conduct of a business corporation in the provision of a public good is so wrong. The people’s interest is paramount on all scores.

THE BROAD NUMBERS
The Berbice River Bridge is a national asset that was priced at US$38 million (G$7,900 million). Legally, 80 percent of its common shares are owned by the private sector, but more than 74 percent of the finance came from the pockets of taxpayers and the workers (pension funds). So hiding behind the Berbice Bridge Act and Regulations is not an option for the directors. Today, the new Government faces an acid test. It is time for us to convert a lemon into lemonade.

But before we go any further, let us put some hard numbers on the table since from all the information released, it appears that there are only three classes of investors in this deal. But no one is considering the Gy$4.1 billion the Government pumped into this project before one pile was driven for this bridge. The taxpayers invested some Gy$2.2 billion to complete the feasibility study and a further Gy$1.9 billion to complete the access roads at both ends of the river to facilitate the timely opening of the bridge at Christmas 2008. Therefore, the State has a stronger position than some tend to think.

Let us now focus on the three classes of investors:
1. The ordinary shareholders basically own the company and have the last call on dividends if available. From all appearance, dividends are not expected to flow before 2021. The holders of the ordinary shares are: New GPC/Queens Atlantic (related to the Ramroop family) – $160 million, Secure International Finance Company (related to the Beharry family) – $80 million, Hand-in-Hand and Demerara Contractors (related to the DDL family) each holding $40 million and the NIS (the taxpayers) – $80 million. I was advised that the 20% NIS interest is currently being represented on the board by Ms. Gillian Burton-Persaud, (current PPP parliamentarian) and Mr. Maurice Solomon.

2. The preferential shareholders have first rights to dividends but do not have voting rights. I have been advised that the NIS has invested some G$950 million in preferential shares, but they have agreed to defer some G$300 million in preferential dividends since 2010. I can understand this decision since the greater good was being served – lower tolls for the general population. But in an environment where the NIS is technically insolvent, this situation has to be remedied soon. Alternative State resources from the Forestry Commission, Frequency Management Unit or the GGMC to buy out some of these preference shares from the NIS should be seriously considered.

3. The bondholders are technically the bankers who own the corporate bonds of some Gy$5,575 million. I was advised that the company paid some Gy$600 million in 2014 to the bondholders and is expected to pay the same amounts in 2015, 2016, 2017 and 2018. From 2019, the payment to the bondholders will shift to Gy$640 million annual; concluding in 2021. Who are the bond holders? NIS (shareholders). Who else? There are some related parties to shareholders – Demerara Bank (part of the DDL family), GBTI (part of the Beharry family), Hand in Hand (also shareholders), Trust Company (part of the DDL family), North American Life Insurance (part of the Beharry family), North American Fire Insurance (part of the Beharry family) and New GPC (part of the Ramroop family). Who else? All the other banks – New Building Society, Scotia Bank, Citizens Bank and Republic Bank. Then the pension funds -GGMC Pension Fund (state employees), GPL Pension Fund (state employees), GuySuCo Pension Fund (sugar workers), Hand In Hand Trust Pension Fund, GAWU Pension Fund (sugar workers), DDL Pension Fund, Neal & Massy Pension Fund and Geddes Grant.

THE OPPORTUNITY
I was advised that in 2014, this Bridge generated revenue of G$1,494 million (close to G$1.5 billion). Before 2014, the company was able to put away some cash resources to meet the future bond payments. However, with the bonds becoming payable since 2014, the company’s cash outflow has escalated at a significant rate to honour the financial commitment to the bondholders. The company is now claiming that they have to raise rates to remain solvent. Utter codswallop.

One factor is certain: this bridge has a monopoly on a growing revenue stream as a result of the increased traffic across the bridge year after year. Revenue there will always be once they have motor vehicles on the roads.
There is only one solution – the Government has to step in to reduce the weighted average cost of capital over the next five years by asking some of the bondholders for partial deferment and the NIS for full deferment.
The NIS should be allowed to sell its bonds to NICIL or GGMC. This will immediately reduce the immediate cash outflow and will put the company on firmer financial foundations with no need to raise tolls.
For those making the national sacrifice in choosing deferment in bonds, they should be offered a sweetener for choosing this option – a higher rate of return that they are currently eligible.
Solutions are there, but we must also understand that behind this whole situation are some invisible hands that are trying their utmost to embarrass this new Government. In this Guyana house, there is only one Government; not two. It is time. Can we do it; yes we can!
(Readers wishing to contact the author can do so via email at: sasesin1@yahoo.com)

source  - http://guyanachronicle.com/let...ooperate-for-guyana/