Government issues comfort letter to bidder
April 28, 2002
Articles on bridges
The foreign interests in the Berbice River Bridge Consortium (BRBC) left Guyana on Thursday with a comfort letter from the government to further the contractual process to bridge the Berbice River. The group is to submit draft development agreements to the government in 60 days.
This eliminates the stage of signing a memorandum of understanding as was done with Ballast Nedam International. Once the BRBC and the government agree to the terms and conditions set out in the draft development agreements within two months, actual construction of a bridge across that river may start in a matter of six months.
John Lotz, team leader for the BRBC and Managing Director of Group 5 of South Africa, Dietrich Silbernagl of UWP Engineers, also of South Africa and Bernard Matthews of Matthews & Associates began negotiations with the government on Tuesday on the Berbice bridge project.
Lotz and Silbernagl left on Thursday after meetings with two officials of Republic Finance & Merchant Bank Ltd on Monday. The group met the local private sector, including institutional investors, at a dinner on Monday evening at which Prime Minister Sam Hinds was present and was told that the local private sector is willing to put US$16 million into the project.
Fincor also told BRBC officials that it remained committed to being a part of the project and was willing to help raise the financing for it.
The group began talks with the government’s negotiating team headed by Winston Brassington on Tuesday after Hinds restated the government’s commitment to the project.
Efforts to reach Hinds on the discussions were not successful but Brassington, yesterday indicated that there was a number of meetings between the parties and a timeframe was agreed to, to take the discussions forward. He did not elaborate.
Lotz, whom this newspaper spoke with on Wednesday evening, said the discussions with the government went very well on both sides.
“We basically have to do some work and get back to the government drafting of documents for the development of the project,” Lotz said. He also said that the essence of a project was always its viability and given that this was a privately funded infrastructure project, the necessary conditions would have to be created to attract investors. The Inter-American Development Bank financed traffic study has shown that the project would not be viable in the first two years because of slow traffic. Local businessmen, who feel a bridge across that river would open up vast opportunities for the development of the Berbice region, do not share this view.
Lotz and Silbernagl arrived on Sunday evening and visited the proposed site for the bridge on Monday.
Stabroek News understands that the local private sector was very upbeat about the project and institutional investors as well as individual businessmen were keen on equity investments into the venture. Such participation, a private sector official indicated on Thursday, is expected to be considered seriously by the consortium. It will also consider the possibility of Fincor’s involvement in the project by next week.
Meanwhile, the letter of comfort from the government to the consortium assures it that the enabling environment will be created to allow for private sector investment in massive infrastructure type projects which means a special fiscal package will be put in place to allow for such projects, starting with the Berbice bridge project.
This is expected to include duty and tax-free concessions on imports, the waiver of withholding taxes on interest and the removal of taxes from income gained from the investment.
Stabroek News was also told that the BRBC will have to update its proposal to construct the bridge across the Berbice River, which may mean an upward movement on its bid price of $45.9 million.
The Inter-American Development Bank (IDB) is unlikely to finance US$11 million of access roads for the project because this will depend on a feasibility study, which is expected to further delay the project. Additionally, the results of the traffic study are not expected to aid the bank’s co-financing of the project. US$11 million in the bridges project funded by the bank was set aside for the Berbice bridge.
The BRBC also includes Mongmotse Capital as its financial associates. BRBC already has a commitment of financing for the project using the credit guaranteed scheme in South Africa which stipulates that once 70% of the inputs for a project are sourced from South Africa, financing would be available at rates between eight per cent and nine per cent per annum. The Capital Equipment Export Council of South Africa had earlier indicated its willingness to finance the feasibility study and detailed design of the bridge as pre start-up costs.
The Berbice bridge project is two years behind schedule as after 22 months of negotiations with BNI, the firm walked from the project citing financial difficulties and a restructuring of its international operations as the reason. BNI was the first ranked bidder and BRBC the second. The latter was invited earlier this month to come in and start talks with the government on the project. BRBC does not anticipate the project being dragged out as it already has financing for the project secured and only needs to work out the contractual details.