Govt controls Berbice Bridge via half of Board plus “golden share”

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…Govt violated contractual agreement – Vice Chairman

 

Berbice Bridge
The Berbice Bridge

Government, via the National Industrial and Commercial Investments Limited (NICIL) and the National Insurance Scheme (NIS), has control of the Berbice River Bridge.

This is according to Director of the Berbice Bridge Company Incorporated (BBCI), Naresh Maraj.

In slamming media reports which misrepresent the true composition and voting rights of the BBCI, Maraj told this publication that the Board has eight members, of which — since 2015 — the Government, through NICIL and NIS, has “four board members via the common stocks they own, and also by nominating two directors to represent subordinate loan holders. In this way, they had to have supported any and all decisions of the Board, including those on toll increases.”

Maraj said NICIL controls a “Special Share”, which is a safeguard provision inserted into BCCI’s Articles of Incorporation to ensure that the directors of the company – controlled by whoever — do not act outside of their mandate. According to Maraj, this provision serves as a veto even against a majority of the Board, and for this reason it’s called a “golden share”.

The director added that this therefore means that ultimately the Government, which controls NICIL, has control over the activities of the Bridge.

He declared his disappointment that sections of the media, especially Kaieteur News, have, over the past 10 years, ignored the distinction between “common shareholders” and “preferred shareholders.” Maraj said an understanding of the concepts is important, since the distinction determines the reality of who owns what, and who has control of what at the BBCI.

“It is trite company law that the common shareholders control the equity in the investment, but that the preferred shareholders have a priority on dividends. If the common shareholders wanted to get wealthy, they would have had to ensure there were enough profits generated to first pay dividends to preferred shareholders, and then have the Board declare dividends for them,” said Maraj. “This is unlike the case with family-owned businesses.”

He added that in the case of the Berbice Bridge, it has been repeatedly stated that the common shareholders never received a penny in the decade the bridge has been operational. Their investment in this public-private partnership was clearly done for patriotic reasons and not for profits, since there has never been any of the latter.”

Since the announcement that tolls would be increased for the Berbice River Bridge, there has been persistent calls for Government to move in the direction of taking over control of the bridge to avoid placing a heavy burden on Guyanese, especially those  living in the Berbice region.

Several persons from civil society, including members of the trade union movement, have expressed worry about the state of the NIS.

“While the AFC/PNC tabloid Kaieteur News is sensationalising the news to make the Government into “a knight in shining armour”, they (both) are ignoring the precarious financial position of the NIS, which affects the future of a hundred thousand workers,” a trade unionist told this publication.

Similarly, members of the Private Sector Commission were asked about Government’s handling of the BCCI’s request for a toll increase.

“In my personal opinion, I think it is petty populist politics in the extreme geared for the Local Government Elections. The Bridge is chaired by AFC prominent member Dr Surendra Persaud. I think this is dangerous in the extreme for the Government’s own declared position that the Public-Private Partnership (P3) financing model is being considered for other infrastructural projects. No private investor will touch a P3 project with a ten-foot pole after this,” the PSC member noted.

Contractual violation

Vice Chairman of the BBCI Board of Directors, Paul Cheong, recently highlighted concerns with what he said were lies being peddled in a section of the media in regard to the reason why the company was forced to increase its tolls.

Cheong, in a recent letter in the press, noted that the BBCI is bound by its Concession Agreement under the Berbice River Bridge Act, in implementing the tolls charged at the bridge. The company, he said, has no alternative but to honour the Toll Adjustment Formula prescribed in the agreement.

According to the Vice Chairman, the BBCI has no discretion in calculating the amount of the toll. “The Company is bound by the Toll Adjustment Policy dictating the Formula.Since 2015, respective governments (previous and present) have violated their contractual obligations to implement an annual toll adjustment which would have resulted in small incremental adjustments instead of the current burdensome level. The Kaieteur News has chosen to ignore this truth,” Cheong added.

The current level of toll adjustment is entirely the fault of the Government, not the company, he noted. He added that prior to, and since taking office, this Government has refused to meet with the BBCI in spite of three requests to do so. The power and the privilege to review or amend the Concession Agreement rest entirely with the Government.

Slamming the Kaieteur News for deliberately misrepresenting the facts, Cheong stated that the six ordinary shareholders are not guaranteed a return on their investment.

“Their investments are subjected to the risk of the company making a profit and cash flow availability. Since BBCI has made no profit, no dividends have been paid to any of the shareholders. Even if a profit is made, the payment of any dividends is at the discretion of the directors, after taking into account the cash flow position of the company,” Cheong said.

The truth, he added, is that from the inception of the Bridge, the NIS, whose investments represent every Guyanese citizen, has earned 94 per cent returns on its total investment, which is G$2.4 billion.

“Because of the shortfall in revenue, resulting from Government’s refusal over the past three years to make toll adjustments, the BBCI has been able to pay the NIS only G$1.7B of the returns earned from its G$2.59 billion investment in BBCI, and G$222 million in principle repayments,” Cheong stated.

Ever since the announcement by the BBCI Chairman Dr Persaud that the company hopes to implement an increase, the Government has shown a high level of reluctance to meet with the company, and has made known its intention not to buy out the Bridge.

Public Infrastructure Minister David Patterson has stated that a Government buyout of the BBCI is not economically feasible, and the Government’s proposed annual subsidy is the best option to reduce tolls for travellers. He said Government has a restrictive financial budget.

Questioned further during a recent press conference, the minister said no consideration will be given to taking over the Bridge. However, in the same breath, he said Government is committed to reducing tolls, and not the other way around.

He further explained that if such consideration is ever given, Government would have to honour payments to shareholders, and a number of other issues would have to be ironed out. According to him, the final payout for the Bridge would be significantly greater than it appears now.

Outspoken political activist and former Presidential Advisor Ramon Gaskin, a trained economist, is suggesting a total buyout of the bridge by Government so as to resolve the issue.

“You don’t need to make a profit, just cover maintenance and pay the NIS interest on their investment, and you could lower the rate to where it was, and it could go lower,” he advised.

Overseas-based economist Professor Tarron Khemraj also feels that Government should buy over the Berbice Bridge in its entirety. He said the Bridge is now financially unsustainable, as compared to when the proposal for its construction was implemented.

He said that once the Government owns the bridge, some decisions would have to be made to address the high operating costs. According to him, decisions would have to be made with the objective of motivating private sector employment in Berbice.

A former advisor to the Alliance For Change (AFC), Tarron Khemraj, is also opposed to increasing the Bridge tolls, especially because the traffic flow to accommodate the higher tolls is not there.

At this stage, Khemraj said, it is clear the bridge has a dimension of higher public good than the private aspect. Therefore, he recommended, Government should buy out all of the shares.

As per the increases, cars and minibuses will now be charged $8040; pickups, small trucks and four-wheel drive vehicles $14,600; medium trucks $27,720; large trucks $49,600; art trucks $116,680; freight $1680 and boats passing through the river will be charged $401,040.

The proposed increases are scheduled to take effect on November 12, the same day that Local Government Elections (LGE) will be held; and as the time draws closer to the date set for the imposition of fare increases at the Berbice River Bridge, there continues to be great worry over whether this could in fact take effect, or whether the Government would step in and reverse the decision.

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