GEC deal still on course - overseas investors assure Guyana Chronicle August 14, 1999 THE overseas investors negotiating for a major share in the GEC say the proposed deal is still on course and they are committed to the transaction. The assurance has come in the wake of allegations about the negotiations from the main opposition People's National Congress (PNC). In a statement released yesterday, point man for the investors, Mr. Andrew Aldridge said criticism of the Government for not releasing detailed arrangements, was "primarily a political issue, and we are not about to get involved in a political dispute." "We are negotiating with the Government as the elected representative of the people", he stated. "CDC/ESBI (Commonwealth Development Corporation/Electricity Supply Board of Ireland) wish to assure all parties that we remain firmly committed to the GEC transaction", Aldridge said. "...this deal has taken a great deal of time to complete due in no small part to the changed economic circumstances in Guyana, events relating to the Quadripartite Committee's involvement in late 1998, and ongoing political agitation in Guyana", he said. "...We have worked with Government ministries and officials who have negotiated robustly at each stage to ensure that the deal meets the best interests of Guyana," Aldridge said. Officials yesterday said the investors in the GEC (Guyana Electricity Corporation) are expected here next week to advance the transaction with the objective of concluding the deal by the end of the month. Head of the Privatisation Unit, Mr. Winston Brassington, was at yesterday's regular briefing by Head of the Presidential Secretariat, Dr. Roger Luncheon and released Aldridge's response to the PNC's claims on the negotiations. According to Brassington, his unit asked CDC to respond to the PNC and it did so. Brassington read excerpts of the reply at the briefing at the GTV studio in Georgetown. At a press conference this week, PNC leader, Mr. Desmond Hoyte released a purported internal fax between CDC of London and its Barbados office on matters related to the GEC and discussions with Brassington. Hoyte called on Brassington to explain the statements regarding himself. Brassington said that based on Hoyte's interpretation of the correspondence, from various media reports, Hoyte was claiming the Privatisation Unit head was dealing with the overseas investors in ways that he should not, that he has been compromised and that Brassington is a CDC man. He charged that Brassington was supposed to be representing the Government's interest and must give an explanation of what is "inferred in the letter." Brassington told reporters that Aldridge, commenting on the private correspondence, reiterated that "all members of the Government's negotiating team have acted with professional vigour." Aldridge was reported as saying that no comments he has made in any communications are meant to imply that the head of the unit or others in Guyana have been compromised or have behaved outside acceptable norms. The official, in his response, maintained that the GEC transaction, which will see the injection of US$23.45M in the new electricity utility, Guyana Power and Light Inc., would be concluded shortly. Legislative changes required to facilitate the deal were recently enacted, amid protests and criticism of the Government and the CDC/ESBI consortium from parties questioning the way the action has been handled in Guyana, he observed. Aldridge stated that as is normal in such processes, the sides are working on the finer details. Indicating that the Government had a difficult choice to make on either releasing hundreds of pages of legal and technical documentation, or providing interested parties with a detailed summary of the deal, Aldridge noted that the administration decided to release the summary, with the support of their local and foreign advisors, and "we respected that choice". CDC/ESBI felt that releasing hundreds of pages of documentation could easily lead to more confusion than clarity, and would create an opportunity for parties to criticise elements of the deal as being one-sided, without acknowledging other elements of the agreement which provide for a balance of interests. Aldridge's letter explained that this is why it is standard practice around the world for such commercial negotiations to remain confidential until concluded, adding "we are pleased that in due course the Government will lay before Parliament the agreements they sign". On CDC/ESBI being criticised for not being available to answer questions relating to the deal, the consortium expressed surprise, claiming they have taken pains when in Guyana to meet the opposition, the press, unions, and special interest groups, in an effort to answer questions about the deal, and about the way the firm does business. Aldridge said that CDC/ESBI recently met representatives of the Stabroek News and the Guyana Chronicle newspapers and appeared on a local television show. "People want to know more about CDC and ESBI and we have found that each time we talk to people, and relate the way that we do business in other countries, they leave the conversation with greater confidence that we are the right people to run the Guyanese electric utility," Aldridge said. And, on claims that CDC/ESBI have departed from the terms of the original bid, Aldridge explained that the initial proposal, which was accepted by the Government, contemplated a 25 per cent increase in rates in 1998. "After several months of negotiations, we all identified a major issue late in 1998 when the social partners signalled that they had serious and valid concerns about the proposed rate increase." "...The challenge was clear, we and the Government had to come up with a new deal structure which would see a series of smaller rate increases over several years," the official said. CDC/ESBI felt they negotiated long and hard on the new structure and created something which is truly innovative. To keep rates down and phase in modest increases, the revised deal structure includes staged investment of the US$23.45M from CDC/ESBI over three years, and a subsidisation of rates in 1999 and 2000 by Government. In response on whether this means that the consortium is not really committed to investing US$9M, Aldridge said "Absolutely not", adding that the full US$23.45M is supported by a letter of credit from an international bank and there can be no question of CDC/ESBI's commitment to invest the full amount. The transaction is scheduled for conclusion shortly as the final legal and commercial processes in Guyana are completed. The consortium will be bringing in an expatriate management team of about 14 experts to take control of all aspects of the utility's operation. Aldridge said CDC/ESBI have started developing detailed plans for the turnaround and subsequent expansion of the utility. Brassington emphasised that he has nothing to hide and has in no way been compromised, adding that the PNC's interpretation of the matter in their statements appears illogical and distorted. Reiterating that the faxed memo was first and foremost an internal briefing document, he said that based on the language it was clearly not intended to be released to the public or anyone outside of CDC. "The fact that it is now in the public domain is unfortunate and does beg an explanation of some of the language...since I am not the author of the document, CDC has been requested and has responded on what is inferred in the letter," Brassington said. Pointing to other statements on foreign currency and tax concessions, the unit head said these matters have been publicly disclosed already. All issues on taxes are contained in the deal summary released earlier. Foreign exchange issues have been dealt with earlier and reported in the newspapers following a June 24 press conference. "Nothing has changed", he said. The letters referred to in the fax are normal given that certain matters stated in the agreements that the Government will sign, also have to be signed off by the respective institutions or persons vested with the statutory authority to implement these matters. At the June 24 press conference, it was stated that all the schedules to the major agreement were still being worked on. Brassington indicated that some of these schedules are major agreements in themselves and include: the licence, the vesting order, articles and by laws of the GPL, operating targets and performance targets, initial business plan, direct deed, escrow agreement, letter of credit, promissory note and debenture. "You are all aware that the Government has stated that the agreements will be made public when they are concluded. While the body of the agreements are concluded, there will be a tremendous volume of work ongoing on the schedules which is integral to concluding the transaction," he told reporters. As the two-page internal fax of the CDC has shown, Brassington said, in the absence of complete information, less than all of the information is likely to be distorted and misunderstood. Asked about a US$1.7M the Government owed the CDC, Brassington explained that this refers to money previously owed to CDC which had been held up in what is called the EPBS scheme. He assured that CDC had confirmed that the amount owed is not a condition of the completion of the GEC deal, adding that it is understandable that as they come back to Guyana in a major way that they would like to see that matter resolved. The scheme generally relates to foreign exchange remittances during the time of exchange controls and represents funds held during the 1980s and the early '90s. (ROBERT BAZIL) A © page from: Guyana: Land of Six Peoples