With the recent announcement of increased tolls from the Berbice Bridge Company Incorporated (BBCI), financial analyst Christopher Ram is warning that, in the event of Government buying out private shares, a fair offer must be made to investors.
In a recent interview with this publication, Ram noted the implications that come from the whole situation. According to Ram, Government could risk undermining the confidence of the private sector in future Public/Private Partnerships (PPP). At present, projects such as the new Demerara River Bridge and the Linden/Lethem road link are being premised on this PPP model.
“Government is not behaving like it’s a public-private partnership. That’s what it’s supposed to be. This is a joint effort by the state and the private sector to provide a public asset, financed by the private sector in which the government makes a contribution,” Ram said.
“There are concessions to the private sector, including tax holidays for a defined period, after which the asset goes to the Government… I believe the increase
Accountant and Attorney-at-Law Christopher Ram
cannot go through without a toll order. The company cannot enforce the increase without a toll order.”
Ram noted that consideration must be given to the toll increase potentially affecting demand for the service, resulting in reduced revenue from the bridge. Ram acknowledged that the agreement provides for the tolls to be reduced as the debt is paid off.
“As the debts are paid off, the tolls will go down,” Ram noted of the project document. “Tolls will go down. Remember, you have to pay your loans. Then you have the preference dividends. All you have to do is pay the loans. And that’s how this project is conceived.”
One way of resolving the issue, Ram noted, was for the life of the concession period to be extended and guarantees be given to the creditors. When it comes to suggestions being made for a buyout, Ram noted, careful planning is needed.
“All they have to do is say, ‘Look, when the bonds mature, they’ll reinvest the bond in new bonds at Treasury bill rates, because you wouldn’t get that anywhere else… The solution is staring them in the face, but they’re playing politics.
“If the Government wants to (buy out shares) it has to be fair. Government paid DDL (Demerara Distillers Limited) a premium for ordinary shares. Then surely it’s got to do the same thing.”
Government bought DDL’s shares for approximately $40 million in 2016. At the time, Finance Minister Winston Jordan had indicated that he was open to offers from shareholders “for the right price.” It is an option several have posited could avert fare increases, as Government would be able to determine the tolls directly.
Contacted on Monday, Public Infrastructure Minister David Patterson was asked whether Government is considering buying out BBCI’s private shares in order to gain control over the tolls.
“No it’s not! It’s not! It’s not on the Government’s position!” he said when asked, declining to give any reasons against it.
Increases
The increases were announced by BBCI Chairman Dr Surendra Persaud during a press conference recently. According to Persaud, BBCI were formally informed by Patterson that Government would not agree to requests for an increase in tolls.
“The Minister instead proposed that the Government undertake the responsibility only for servicing the bridge pontoons, and offered to arrange a meeting with the Minister of Finance for further consultations on the matter,” Persaud, also
The Linden/Lethem road is one major project Government would require partnership with the private sector
chairman of the National Insurance Scheme (NIS), had said.
“Please note, however, that these options are outside the contractual agreement that exist within the contractual agreement, and thus would be a breach… The construction of the Berbice Bridge would not have been possible without a partnership between the Government and private sector. In that partnership, the private sector invested approximately $9 Billion.”
Persaud revealed that maintaining the pontoons is only a small part of the operational cost. Thus he noted that the Minister’s offer would be of little help. As a consequence, and following legal advice being tendered, increases would be applied to all classes of vehicles from November 12.
Cars and minibuses will now be charged $8,040; pickups, small trucks and four wheel drive vehicles, $14,600; medium trucks, $27,720; large trucks, $49,600; Art trucks, $116,680; freight, $1,680; and boats passing through the bridge will be charged $401,040.
Public Infrastructure Minister David Patterson had called a hasty press conference after the news of the increase broke. There, he had informed the press that all options to stop the increases would be considered.
These options as laid out by the Minister ran the gamut, from amending the Berbice Bridge agreement to an injunction to stating that “if the Minister of Public Security says it’s a vital and important service, and says declare an order to keep it open, we’ll do that.”
The bridge, which was built under the previous Government at a cost of approximately US$40 million, was supposed to generate enough revenue to cover operational and maintenance costs, while providing a return on the Public/Private Partnership investments.
