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Speech

Mr. Speaker, I have on several occasions provided an update to this Honourable House on the progress of the divestment of Government assets in the sugar industry. It will be recalled that the St. Thomas and Trelawny estates were divested last July to Golden Grove Sugar Company and Everglades Farms Limited respectively. In relation to Frome, Monymusk and Bernard Lodge, this House is also aware of the continuing efforts to divest these three entities.
Mr. Speaker, following Eridiana Suisse’s indication to the Government in December 2009, that it would not be pursuing the acquisition of these three estates, the Cabinet in January of this year authorized the reopening of the sugar divestment exercise. The Information Memorandum in respect of the assets of Frome, Monymusk and Bernard Lodge was subsequently amended, and invitation for Expressions of Interest invited, with a deadline for submission of Expressions of Interest by May 25, 2010. I have already advised this House in previous Statements of the eight (8) entities that submitted Expressions of Interest.
Mr. Speaker, two (2) of the interested entities, Cari-med Limited and Theodora Holdings Limited withdrew from the process. Negotiations ensued with the remaining six (6) parties, however, Eridanna Sadam and Tate and Lyle Sugars did not submit individual proposals, since their only interest was to participate in a consortium. Four (4) entities therefore submitted detailed proposals by the deadline of July 2, 2010. These entities are:Complant International Sugar Industry Company Limited (China):Energen Development Limited (USA/Jamaica);Everglades Farms Limited (Jamaica); andIntegrated Agriculture and Energy, LLC (USA/Jamaica);
The proposals were evaluated based on the following criteria:Sound development plan demonstrating sustainability;Managerial expertise and track record;Demonstration of identified markets; andDisclosure of transparent, variable and credible source of funds to finance their business plans.
Mr. Speaker, I am pleased to advise this Honourable House that upon evaluation of the four (4) proposals by the Sugar Divestment Team (SDT), the Board of the SCJ Holdings recommended for Cabinet’s approval the proposal from COMPLANT International Sugar Industry Company of China. The Cabinet yesterday approved the said recommendation of the Board of the SCJ Holdings Limited. With this approval, the SDT is now authorized and mandated to negotiate and finalize specific agreements with COMPLANT related to the proposal to acquire Frome, Monymusk and Bernard Lodge. These agreements include sales agreement, lease and other pertinent agreements. It is our expectation that these concrete agreements will be speedily and successfully negotiated.
Mr. Speaker, COMPLANT will acquire the three factories and attendant lands for US$9 Million or J$774 Million, and will also lease some 18,000 hectares of cane lands for US$35/hectare per annum or J$3,010 for a period of fifty (50) years renewable for another twenty-five (25) years. In essence therefore, Mr. Speaker, the country stands to gain revenue of J$828.6 Million in the first year of the Agreement, and J$54.6 Million per annum thereafter from lease payments.
COMPLANT will develop these assets in two phases. In Phase One, they commit to spend US$126.8 Million or J$11 Billion immediately and continuing over a three-year period to rehabilitate the fields on the three estates as well as, the factories at Frome and Monymusk. In Phase two COMPLANT proposes to build a sugar refinery in Jamaica, contingent on the results of a feasibility study that they will undertake, and which is to be completed by May 2011. The plan is for a 200,000 tonnes refinery capacity, to primarily satisfy the Jamaican and regional demands, and possibly the European Union. Mr. Speaker, if the feasibility studies are favourable, then COMPLANT will invest US$180 Million or J$15.5 Billion to construct the refinery.
COMPLANT proposes further to acquire additional lands for cane expansion in order to increase throughput to the factories. In tandem with this they propose to work closely with local cane farmers, providing them with the necessary support to increase production and productivity, and ensure continued supplies to their factories. Mr. Speaker, an interesting aspect of COMPLANT’s plan is the use of cassava to produce ethanol in Jamaica. COMPLANT is associated with a state-of-the-art cassava-based ethanol facility in Southern China, for which China has secured a number of patents. They also operate similar plants in some twelve (12) countries in Africa. This aspect of the plan will open up possibilities for the expansion of commercial cassava production in Jamaica, by our farmers on substantial areas of non sugar lands including mined out bauxite lands.
Mr. Speaker, the Government is satisfied with this proposal for a number of reasons. Firstly, the mix of products it proposes, that is, raw sugar, molasses, refined sugar, ethanol, and co-generation, accords with the Government’s Sugar Adaptation Strategy that speaks to a multi-product based industry. Secondly, it will open up tremendous opportunity for the utilization of lands which are now idle for increased sugar cane production. In this scenario, small private independent cane farmers will have a significant stake, in terms of the support that will be provided to them to expand their own production. The possibility of putting substantial acreages of non sugar lands or even marginal lands into large-scale cassava production will have a tremendous impact on agricultural production overall, and farmers income specifically. We believe the plan is sustainable and will not envisage the Government returning to the control of the operation of these estates.
Mr. Speaker, COMPLANT has enormous experience in the growing of sugarcane and the manufacturing of all the by-products alluded to above, in both China and Africa. It is also the case that COMPLANT is a state corporation, owned by the state investment arm of The People’s Republic of China. The company is therefore well resourced, and this is reflected in the favourable debt to equity mix in their proposal.
Mr. Speaker, although COMPLANT would have access to the estates immediately on the signing of the various Agreements in terms of commencing replanting and rehabilitation works and so on, consistent with the Agreement with the partial Pre-shipment Financing Agreement with Tate and Lyle, COMPLANT would only fully take over the operation at the end of the 2010/2011 crop year.
Mr. Speaker, for us divestment is not an event, but a process. Even though the Government will be withdrawing for the operations of these entities, it has every interest to ensure that they are divested in a manner that allows for their sustainable development over time. In this regard, the Government will ensure that the agreement between itself and COMPLANT will allow for the proper monitoring of the commitments made in this agreement to ensure compliance. It will therefore be the responsibility of the SCJ Holdings Limited, which will remain the holder of all the leased assets, to monitor the agreement and ensure compliance. The SCJ Holdings Limited will now be reconfigured to reflect this responsibility.
Long Pond Estate UpdateMr. Speaker, I wish to turn my attention briefly to address the matter of the announced closure of the Long Pond Sugar Factory for the next crop year. Mr. Speaker, let me say up front that it was very unfortunate that key stakeholders in the industry only learned of the impending closure via the media. As this House is well aware, the Trelawny Sugar Estate was divested to Everglades Farm Limited in July last year. The new owners however, are still subject to the regulation of the Sugar Industry Authority as prescribed in the Sugar Industry Control Act.
Mr. Speaker, it was well known even before the divestment, that the factory required substantial rehabilitation and overhaul. It is not entirely unusual that the extent of overhaul to factories sometimes necessitate suspension of operations. The management of Everglades has indicated that this is now the case. In the circumstances, therefore, what is critical is that attendant issues in relation to the take-off of farmers’ cane are adequately addressed. In this regard, I have mandated the Executive Chairman of the Sugar Industry Authority to deal with this matter, and he has commenced discussions with the parties with a view to resolving all the issues amicably. It is my belief that the existing regulatory structure provides appropriate mechanism to resolve these issues.
Sugar InquiryMr. Speaker, as regards the rest of the industry, this Honourable House is well aware that the Sugar Commission of Inquiry is currently underway. A number of critical stakeholders have already made presentations at the hearings. We still hold to the September 30, 2010 deadline for the submission of the recommendations of the Commission. As announced previously, these recommendations will inform the future legal, regulatory and institution framework of the sector.
Mr. Speaker, the divestment of Government’s interests in the sugar industry has indeed been protracted. Along the way many lost faith in the industry. We could not afford to lose faith, not only because this industry impacts so many thousand lives, but because we were always convinced that with proper management and appropriate investment, this industry has the potential to be profitable and sustainable. It is our hope and our confidence that we will successfully finalize all the necessary agreements with COMPLANT, which will put them in a position to make a remarkable contribution to the future of sugar in Jamaica.
Thank you.