KINGSTON — The House of Representatives on Wednesday July 13, 2011 approved a government guarantee for a US$37 million loan to the Central Wastewater Treatment Company.
The loan, from National Commercial Bank (NCB) Capital Markets Limited, is to refinance an existing loan facility with the NCB for the construction of the Soapberry wastewater treatment plant in St. Catherine.
Minister of Housing, Environment and Water, Hon. Dr. Horace Chang, informed that the US$37 million was borrowed from NCB in 2006, as part of the required capital for the development of the facility. The National Housing Trust (NHT) and the Urban Development Corporation (UDC) had put in additional sums for the US$51.5 million project, which is intended to solve the Corporate Area’s long-standing sewage treatment problems and save the Kingston Harbour.
Dr. Chang explained that the loan from NCB “was borrowed as bridging finance and therefore, the rate was rather onerous. In fact we are operating at about 11.7 per cent."
“The reality is that at the current rates, there will be great difficulty in servicing that particular loan, and it was necessary to seek to refinance the loan on long-term financing. We have ended up with three bonds through NCB Capital Markets Limited, which will average about eight per cent compared to the former 11.7 per cent,” he informed.
The Ministry of Finance recommended NCB Capital Markets as the preferred financial institution to arrange the restructuring of the loan following the evaluation of financing offers.
The restructuring will be arranged as note issues, with United States dollar secured notes offered to investors by private placement, and are intended to be constituted under a trust deed with Jamaica Central Securities Depository Trustee Services Limited, which will be appointed to act as trustee for the note holders.
In his remarks, Member of Parliament for Central Manchester, Peter Bunting queried whether the rates offered by NCB Capital Markets were the most competitive in the market. He noted that “rates internationally have fallen a bit in the five years since the original facility was done as well as rates locally."
In response, Dr. Chang stated that the Government did seek participation from other banks while noting that “we had started this discussion over a year ago and the interest from the other banks was not much."
Central Wastewater Treatment Company financial statements for the year ended February 28, 2011 showed a net loss on operations of $95 million, with operating revenues amounting to $440.2 million.
Operating expenditures were recorded at $535 million of which loan interest amounted to $270.6 million, maintenance of $86 million, and depreciation of $151.8 million.
By LATONYA LINTON, JIS Reporter