China Eximbank provides RMB 270 million loan for the Skeldon Bagasse Cogeneration Project

Project narrative

On December 14, 2004, the Chinese Government and the Government of Guyana signed a preferential loan framework agreement of the Skeldon Bagasse Cogeneration Project. Then, on January 25, 2005, Guyana's Ministry of Finance and the Export-Import Bank of China signed an RMB 270,000,000 ($40.6 million) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL NO. (2005) 1 TOTAL NO. (122)] for the Skeldon Bagasse Cogeneration Project. The GCL carried the following borrowing terms: a 20-year loan maturity, a 5-year grace period, a 2% interest rate, a 0% default (penalty) interest rate, a 0.2% management fee, and a 0.2% commitment fee. The GCL’s final maturity date is February 2022. The proceeds of the GCL (loan) were on-lent to the Guyana Sugar Corporation Inc. (a Guyanese state-owned enterprise), which in turn use the loan proceeds to finance a commercial (EPC) contract (No. SW4C) that it signed with CNTIC Trading Co., Ltd. on June 22, 2004. The loan achieved a disbursement rate of at least 86.3%. As of December 31, 2020, the loan’s total amount outstanding (including principal and capitalized interest) was RMB 77,516,000. As of December 31st, 2021, the loan's total amount outstanding was RMB 44,773,799. The purpose of the project was to construct the Skeldon Sugar Factory. The factory is located in Skeldon, which is a small town in eastern coastal Guyana (within the East Berbice-Corentyne Region), on the estuary of the Courantyne River, which forms Guyana's border with Suriname. The project involved the addition of a more efficient cogeneration plant to the ongoing Skeldon Sugar Modernization Project (SSMP) – a modern sugar factory that manufactures Very High Pol (VHP) raw sugar. The cogeneration plant generates bagasse-based electricity for internal use in the factory and for sale to the Berbice regional grid, which was designed to displace the use of light fuel oil in diesel engine-driven generators operated by the Guyana Power and Light Company. CNTIC Trading Co., Ltd. was the EPC contractor responsible for project implementation. The first loan disbursement was received in March 2005. Construction began in September 2005. CNTIC Trading Co., Ltd. handed over a diesel engine for the project in December 2007. Then, in March 2009, the factory began operations. A formal project completion ceremony took place on August 22, 2009. The Defects Notification Period (Warranty) expired in October 2009 for the punt dumpers and in March 2010 for the remainder of the plant. However, in April 2022, the country’s former Auditor General, Anand Goolsarran, told the media that the Skeldon Bagasse Cogeneration Project had ‘failed completely’ to deliver in terms of its objectives, outputs, outcomes and impacts, thereby ‘encumbering the Guyana’s public debt […] with little or nothing to show for the expenditure incurred’. He said that CNTIC Trading Co., Ltd. underperformed and the Government of Guyana ignored recommendations by Booker Tate — a UK-based management firm that was hired to look at the design and oversee the implementation of the project — to terminate its June 2004 commercial contract with CNTIC Trading Co., Ltd. He also pointed out that, while the project was initially estimated to cost $165 million, it ultimately ended up costing $187 million with funding from the Guyana Sugar Corporation Inc., the World Bank, China Eximbank, and the Caribbean Development Bank. Guyana Sugar Corporation Inc.’s contribution of $53 million was intended to come from the sale of land. However, the sale did not materialize and the sugar corporation ended up using its own resources, thus depleting its working capital. The Skeldon Bagasse Cogeneration Project was the brainchild of former Guyanese President Bharrat Jagdeo. He originally said that the factory would have the capability to produce sugar for $0.12 per pound. However, the cost of production ended up being way above $0.12 per pound and the factory never came anywhere near to producing the promised 110,000 tons of sugar per annum. It was later shuttered by the APNU+AFC administration.