John Lotz, Managing Partner of the Berbice River Bridge Consortium (BRBC) feels there is "no political will" to take the Berbice Bridge project forward or that an alternate agenda is afoot to secure a new developer or contractor for the project.
President Bharrat Jagdeo signalled last Thursday that an agreement might not be possible with the BRBC to bridge the Berbice River given that the government was required to finance US$1M of the development work leading up to construction. The sum was to be reimbursed had the government signed agreements with BRBC to bridge the river.
The BRBC since July of 2002 reached agreement with the government's negotiating team headed by Winston Brassington on a development agreement to take the process forward. This agreement was subject to ratification by the President but to date the consortium has not heard from the government on the issue.
"Almost one year later, we have not had the decency of a call to tell us the status of the government's decision. We have not, either, received any advice from the Privatisation Unit," Lotz told Stabroek News on Sunday.
Three years ago, the government invited bids for a build, operate and transfer (BOT) project for the Berbice River Bridge and Ballast Nedam International (BNI) was ranked the preferred bidder in controversial circumstances. BRBC was ranked second.
However, after more than a year of negotiations with BNI, the company walked from the project citing difficulties in its international division, and the government invited BRBC to update its proposal and enter negotiations.
Lotz said during the first round of talks, it was agreed that a development framework agreement would be effected to take the project forward. This framework was to be a joint exercise to allow for checks on the financial, technical and legal aspects before signing of the final agreements to allow for construction of the bridge. He said the negotiators returned to South Africa and at a further cost prepared a conceptual design and the basic draft development agreement for signature. The consortium also had preliminary discussions with some financial institutions on funding for the project.
Lotz recalled that the negotiating team returned in 2002 and after one week of meetings with the government, a development agreement was reached.
"Everyone at these meetings was satisfied and agreed on the way forward. The agreement was amended to suit but now allowed for milestones to check progress and to work to a strict budget. The agreement was then referred to the President for his approval," said Lotz.
He indicated that from the very first contact with the government, BRBC had advised that the bridge would not generate sufficient revenue in its early years of operations to make the project financially sustainable.
"The implications are simple. You would require a partnership or support from the government to overcome these early years if you really want the bridge. We introduced some innovative ideas to assist the government to find the resources to support the project in the early years. But the ultimate risk would, however, still sit with the private sector." One of the proposals was cross-subsidisation with the Demerara Harbour Bridge, including higher tolls for the use of the latter.
Noting the substantial costs incurred by the consortium in the entire process to date, Lotz said the politicians now seemed to be electing to abort the BOT concept.
"We have flown staff to Guyana, hired consultants and advisors when requested. These costs are high. How does this reflect on any further private sector investment in Guyana? What confidence would it give third parties (when we approach them) to invest in the bridge project?" Lotz asked, arguing if all the delays on the government side were considered, the Berbice Bridge could now be in place.
He questions both the impasse and the delay in the process given that his group met with competent advisors/officials in the government.
"I await an answer... in fact, any answer! However, the process to date must leave other private sector investors very cautious," Lotz said on the issue.
The government is reluctant to find US$1M for the development phase given that an Inter-American Development Bank (IDB) feasibility study is about to be awarded for a bridge across the Berbice river. This study, with results available within three months, is expected to provide much of the information, which would have come from studies to be conducted under the development phase in its approach with BRBC.
Additionally, the government was also worried about a 21% increase in the cost of the project by the BRBC from US$37.8M in its original proposal to US$45.9M.
Sources have indicated that the government is looking at local mechanisms to finance the bridge project given the level of liquidity in the financial system. However, a clear position on the part of the government would await the outcome of the IDB feasibility study, which will give an updated cost of the bridge and would potentially release US$11M for the bridge/approach roads.
However, Lotz, in response to this, says that the BRBC was taking the ultimate risk in the project. He pointed out that no matter what the IDB report concluded, the IDB would not guarantee or take the traffic risk associated with the project for 20 years.
He also noted that Guyana was not an investment paradise according to the opinion of the local financial institutions, and for the project to be a success, local financing for the project must carry adequate returns and bearable risks. He said this underscored the need for the government to support the project in the early stages. A stream of benefits of up to US$2.5M was mooted for the first five years.
"Why would any party take the risk if there is no commitment by the government?" Lotz asked. He further pointed out that if the Berbice project were a success, then Guyana would be able to send a message abroad to encourage further investment. The IDB feasibility study, he said, would not do this.