Bauxite bidders briefed
INTERNATIONAL firms interested in buying into the country's two main bauxite entities were yesterday briefed on the prospects at a privatisation seminar in Georgetown. At the forum, Prime Minister Sam Hinds challenged potential investors to find ways to bring the operations back to a state of profitability. The short-listed investors for the Linden Mining Enterprise (LINMINE) and the Berbice Mining Enterprise (BERMINE) turned out in full force for the seminar at Le Meridien Pegasus Hotel in Georgetown. "We need a position in the marketplace...we see the need to bring in expertise," the Prime Minister told the gathering. Pointing out that Guyana still has the largest quantities and some of the best bauxite in the world, Mr. Hinds said the Government was inviting private capital hoping for an arrangement to benefit all sides. "We believe that the capitalisation process will improve the chances of viability of the operations and provide investment," Head of the Privatisation Unit, Mr. Winston Brassington told the group. Bids from those short-listed for LINMINE and BERMINE close on August 30. Negotiations will start next month after the preferred investor for each entity is chosen, and the deal should be concluded by October/November, Brassington projected. He pointed out that investors will be coming into a good deal, since the industry is noted for its skilled workforce and abundant, high quality reserves. Also, the investment comes at a time when the economic environment of the country is relatively stable, Brassington said. The Privatisation Unit boss gave an overview of the bidding process and said funds raised in the initial stages of the take-over will go to the new company. The Government, with a proposed minority shareholding of 40 per cent, will receive no revenue when operations start afresh. He said the deal is similar to the privatisation of the Guyana Electricity Corporation (GEC). The 40 per cent which the Government will own, Brassington noted, is to provide a framework in which other stakeholders can have a say in the business. Those invited to the seminar included representatives of labour, the bauxite unions, the major political parties, consumers associations and environmental specialists. These groups, Brassington said, have a major part to play in the privatisation of the two entities. Although the Government is proposing a 60/40 partnership in favour of the preferred investor, it is still open to suggestions from investors for a different ownership structure. The Government expects that 25 per cent of its 40 per cent will eventually be set aside for workers' ownership. Investors will start with a clean balance sheet to avoid the possibility of linking liabilities to the new company. According to Brassington, LINMINE, for example, owns schools and hospitals in Linden, but these assets will not be part of the deal with the preferred investor. The Privatisation Unit head explained that to move the process faster, within a week to 10 days, his office will be sending out copies of the draft agreement to the investors for perusal and to offer comments when they submit bids. Requirements for bid submissions consist mainly of the table of contents, an executive summary and five major schedules which will be the basis for evaluation. The schedules are as follows: * Schedule A should deal with the capability and credibility of the investor; * Schedule B should have the investor's response to the Government's preferred framework and business plan issues; * Schedule C should have the bid price for the 60 per cent equity and a quotation of the minimum price offer; * Schedule D should deal with broader issues related to the proposed investment and operations; and * Schedule E should have a response to black-lined versions of agreements for the transactions. Investors are expected to carry out a due diligence as part of a bid process and are bound by confidentiality agreements. Brassington said document rooms will be set up for both entities and investors should write his office for information they require. He said while LINMINE and BERMINE have many mining licences, all will not be transferred to the new companies. The investor will be required to pay the Government by cash at the close of the deal. When negotiations start, an Escrow Agreement will be enforced, where the chosen company will be obligated to post a 10 per cent deposit, so that Government can be sure there is a commitment to conclude the arrangement in "good faith." Brassington added that the Government expects the continuation of community service and the operation of its own electricity as in the case of BERMINE. The Government has waived the 6.25 per cent withholding tax and the 10 per cent fuel tax for the first five years, after the agreement is concluded. However, they will have to pay the 1.5 per cent levied on royalties and the 3.5 per cent corporation tax. Brassington impressed on investors the need to have their bids done as comprehensive as possible so that the valuation process will run smoothly. Alcoa World Alumina of the United States, Billiton of London and an American consortium, Morrison Knudsen, Harbison Walker, Texas Ohio Energy and Possehl were short-listed to submit bids for both LINMINE and BERMINE. Another consortium of Guyanese and overseas investors, RASC 2000, was short-listed for LINMINE, while Aroaima Mining Company was chosen for BERMINE. The two companies were put on the market fully last year, following a special technical study presented to the privatisation board. (MICHELLE ELPHAGE)
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