Berbice bridge closer
Govt, Ballast Nedam sign MOU
By Gitanjali Singh
September 28, 2000
A Memorandum of Understanding (MOU) outlining targets preparatory to the signing of a contract for a build, own and transfer (BOT) bridge across the Berbice River was yesterday signed between the government and Ballast Nedam International (BNI).
The MOU has a life of one month, expiring at the end of November. It sets out what the government and BNI have to do before agreements could be reached for the project.
Issues to be finalised by both sides will include financing of the project by BNI, as well as security of a performance bond; financing of a river traffic study and the construction of access roads to the bridge. The traffic study will determine the feasibility of the project and the level of the stream of benefits the government will have to provide to the project to make it viable. Currently, it is estimated that the government will have to provide US$2.5 million annually to the BOT project through a special purpose company which will run the bridge.
Prime Minister Sam Hinds and Commercial Manager of BNI, Kees Wierda, yesterday signed the MOU after a delay of almost an hour. The delay stemmed from some amount of discomfort over the wording of some aspects of the MOU. Senior Counsel Edward Luckhoo was on hand to resolve the differences.
Hinds described the signing of the MOU as a milestone in the government's desire and intent to have a bridge across the Berbice River. "We think the nation does need a number of achievements that would enthuse us, assure us that we are building a country comparable to those around us," Hinds said after the signing. However, he was tight-lipped on the details of the MOU.
Hinds said it was anticipated that before the end of November, the development agreement, loan agreement, design build contract and shareholders agreement would be arrived at.
Wierda expressed his gratitude to the government for selecting BNI as the organiser of the BOT development of the Berbice bridge.
"As you will know, we have the proven experience, track record in these types of projects... not only will we make sure the design capability is met but organise the finance..." Wierda stated.
Hinds said the MOU should be seen as giving enough commitment for the two sides to proceed on a large number of agreements to be worked out.
Hinds noted that the government could have waited and worked straight through to the development agreements as it did with the power company's privatisation, but said it was felt that the MOU route was more "advantageous".
"This allows for a number of things to start happening now," Hinds asserted.
Wierda stated that the MOU would give BNI a position from which to start mobilising the resources for the development of the project.
Asked about the need to raise funds through the issue of bonds on the local market (US$12 million tax free) when Republic Bank had stated openly that it would be financing the project, Wierda simply confirmed that the bank had indicated its interest in being a part of the project. Neither Wierda, the Prime Minister nor William Hinds, who is putting together the financing arrangement, denied that the firm had plans to issue local bonds.
Bonds would provide an instrument of investment to Guyanese and local institutions, while allowing the investor to hedge against exchange rate risk and inflation. The Bank of Guyana would have to approve the issue of such bonds.
Wierda said that BNI and its co-investors would be putting up equity (estimated at US$10 million) and seeking debt financing (initially projected at US$19 million).
The final financing arrangement will depend on the outcome of the traffic study.
Also present at the signing yesterday were Public Works Minister, Anthony Xavier, acting coordinator of the government's negotiating team, Winston Brassington, and team member, George Jardim.
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