Joint Venture Company to be Established for Sugar Industry

A company – Newco – is to be established to allow the Government of Jamaica to effectively enter into a joint venture to carry on the sugar industry’s business.
The Government’s equity in Newco will be 25 per cent, representing the value of the Sugar Company of Jamaica’s assets and Petrojam Ethanol. The Government will have representation on the Board of Directors of Newco, proportionate to its equity in the company.
This was outlined by Agriculture Minister, Dr. Christopher Tufton in a statement to the House of Representatives, yesterday (July 1), in which he gave details of the Heads of Agreement that was signed on June 27 between the Government and Brazilian bio-fuels company, Infinity Bio-Energy (IBE), for privatization of the country’s state-owned sugar estates.
Other key elements of the agreement are that the Government will lease to Newco, the sugar cane lands for no less than 50 years, with an option to renew for a further minimum of 25 years. The factory lands are to be sold to Infinity. These comprise the factory compound, including the sugar factories and an additional area of land of not more than 100 acres immediately surrounding the sugar factories.
In addition, Dr. Tufton informed, the Government is to enter into an Implementation Agreement with Infinity within 30 days of the transition date confirming its commitment to support and ensure the smooth implementation of the transaction, particularly by: passing such Regulations or Orders or otherwise as may be required to ensure that Newco receives tax and other incentives; passing the necessary Regulations or Orders to ensure that a new sugar cane payment formula is instituted, which reflects the diversification of the industry to ethanol and to energy production, while preserving the general principles of fairness and competitiveness of the relationship between the sugar factories and the sugar cane suppliers.
The Government must also commit, under that agreement, to sign a five-year Off-Take Agreement with Newco, by which the Government agrees to accept from Newco, 100 per cent of the ethanol required to fulfill the mandatory mix, at a price of 65 per cent of the gasoline price sold ex-refinery.
Under the implementation agreement, laws will also have to be passed mandating a requirement in Jamaica for a cleaner fuel matrix starting at a mandatory E10 to commence by October 1, 2008 and phased in by April 1, 2009, and providing that E25 use will be required of all vehicles that are E25-compatible on July 1, 2009 and the balance of vehicles phased in over a period of time mutually agreed by the parties.
In addition, Dr. Tufton said the Government is expected to pass legislation required to ensure that Newco may satisfy its molasses quota determined in the existing supply contracts with imported molasses if needed; and use its best efforts to invest in and support necessary improvements in logistical infrastructure, such as cane roads, ports, tanking and other facilities.