Investors in Sugar Industry Should Know Status by June 29

Investors who received an extended deadline and who have pre-qualified to bid on the five state-owned sugar factories, will know their status by June 29 as government moves to wrap up the divestment process.
Executive Chairman of the Sugar Industry Authority (SIA), Ambassador Derick Heaven, tells JIS News that the deadline, which was extended from March, was to accommodate late bids from United States (US) and Brazilian investors.
He says that five entities have already pre-qualified to bid for the factories and an additional number have now put in an application for pre-qualification, and on “June 29, which is the closing date, we will have precisely the exact number of persons, who should pre-qualify to bid. It will be significantly above the five who have already been qualified, and those persons would then be invited to make bids either for part of or all of the government-owned assets in the industry.”
The estates under consideration are Monymusk in Clarendon, Bernard Lodge in St. Catherine, Frome Estates in Westmoreland, Duckenfield in St Thomas and Long Pond in Trelawny.
Ambassador Heaven was unable to disclose the total value of the factories up for divestment, as a valuation of the assets that is currently taking place “is not yet completed.” The names of the interested parties will also remain undisclosed until the June 29 deadline has passed, he tells JIS News.
In May 2006, the Sugarcane Enterprise Team (SET), the body appointed by Cabinet to oversee the privatization of the assets of the sugar industry, launched its website, www.sugarassetsjamaica.com, to allow prospective investors to bid for the opportunity to finance, modernize, operate and manage the government-owned sugar factories and related sugarcane lands.
Bids have been received from the US, Canada, Brazil, and India and expressions of interest have also came from local parties such as the Alan Rickards-led All-Island Cane Farmers Association, which is partnering with the Aracutu Group from Brazil to purchase the assets, as well as Petrojam Ethanol Limited.
“Petrojam Ethanol has interest in that we want to be able to produce local feedstock to widen our market,” says Ricardo Neins, General Manager of the company. A number of investors have expressed interest in ethanol production. According to the SIA Executive Chairman, Jamaica has been supplying ethanol to the US market for a long time, and at present, produces 100 million gallons of the product per year with 60 million gallons through the London-based Jamaica Ethanol Producers and 40 million gallons through Petrojam.
Jamaica exports its entire ethanol product to the US under the Caribbean Basin Initiative, through which Caribbean countries are allowed to export to the US up to seven per cent of the total ethanol it needs duty free. This year, the quota for ethanol exports to the US is 350 million gallons, but Jamaica has to compete for a share of this quota with countries like Costa Rica, El Salvador, Trinidad and St. Croix, which are putting up additional plants.
Mr. Neins says that rather than having to cope with the “first-come, first served competition in fulfilling the seven per cent duty-free quota set by the US for Caribbean countries,” the country could produce enough ethanol to export to Europe.
Ambassador Heaven says however, that while the intention of the government is to facilitate the production of ethanol from locally produced sugarcane, “this is a little way down the road.” The “first target is producing enough cane to achieve all the objectives of the divestment,” he says. “In order to achieve the production of locally produced feedstock and satisfy some of the other demands that are going to be made from locally produced canes – sugar, molasses, possibility of additional energy from the sugarcane – all of this is going to enquire additional sugarcane,” he adds.
In the meantime, the Ministry of Industry, Technology, Energy, and Commerce in collaboration with Petrojam, has already advanced plans to capitalize on the ethanol market.
The Ministry is seeking to gradually introduce the more environmentally-friendly ethanol blend called E-10 as an octane enhancer by 2008, to replace Methyl Tertiary Butyl Ether (MTBE), the octane enhancer produced from petroleum, which is used in the transportation sector, and which studies have found, is detrimental to the environment.
Last year, Petrojam piloted the E-10 fuel in a range of state-owned vehicles and reported success. The company is also pressing ahead with plans to put in the necessary infrastructure at its refinery and at the pumps. The programme will start with the regular 87 octane and move to premium 90.
The Ministry is actively promoting the changeover on the basis that by using locally grown feedstock from sugarcane to produce its own ethanol, Jamaica will reduce its petroleum foreign exchange bill. The initiative will also facilitate the diversification of the sugar industry.
The E-10 blend will provide a market estimated to be 70 million litres of ethanol per year, Ambassador Heaven informs.
Opining on the benefits to farmers from the exploitation of the sugar and ethanol market, Ambassador Heaven states, “well, anything that is going to increase the basket of products from the same raw material is bound to be beneficial to all concerned, including the farmers.”
“Based on the projections, it could mean that the farmers could find that the production of ethanol and some of the other products. compensate for the significant reduction in price that is going to take place in the price of sugar on the (European Union market),” he notes.
In April, Agriculture Minister, Roger Clarke, speaking in the 2007/2008 Budget presentation in Gordon House, predicted a “sweet” future for Jamaica whether investors produce ethanol or a combination of ethanol and sugar.
“The continued diversion of sugar into ethanol in Brazil (the world leader in ethanol production) is causing the price of sugar to rise on the world market. The fact that sugarcane yields eight times more ethanol than corn as a feedstock augurs well for the industry,” he pointed out.
“The bottom line,” Mr. Clarke stated, “is whether ethanol or sugar, we need to produce much more sugarcane through expanded acreages and increased productivity.”
In the meantime, Ambassador Heaven says that the Authority is not looking at providing much more acreages to produce the additional sugarcane needed. “What it is going to require more than anything else is increased productivity, yield per acre. In other words, if we can obtain an average of about 80 tonnes to the hectare, this is the sort of level that would allow us to operate a viable business. At the moment, a lot of farms and areas are operating well below that, and so without increasing the acreage but increasing the husbandry, that will allow for yields to come up to that average,” he points out.
He notes that the investors will qualify only on the basis that they are able to meet the expected targets. “We’re looking for a number of things from them: the necessary requisite management skills, possession of the technology to do what they want to do, but very importantly, to have a very deep pocket to finance the operation. If they satisfy these requirements, they can be considered. We’re not interested in an investor who is coming in for the state to have to find the capital that is required to do all these things,” he points out.
Ambassador Heaven indicates that the diversified industry “should achieve sustainability, within three years of the new investors starting operations,” but this will depend on what investors bring to the table. He told JIS News that he did not expect any retrenching of farmers as a result of these developments in the industry. “We do not envisage any significant change in employment,” he says.
Once investors have been notified of their qualification and the divestment process is complete, they will be expected to start production as soon as possible, Ambassador Heaven says. “All of that info will be supplied to them and will be negotiated with them. We are expecting them to start as soon as possible. We are hoping by the end of the year, we would have finished the divestment process,” he states.