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SCJ sold for US$25m - But Jamaica to pump funds back into Brazil company, give up Petrojam Ethanol Limited
The Jamaican Government will apparently receive no cash, but instead get a 25 per cent stake valued at US$25 million (J$1.8 billion) in the vehicle being used by Infinity Bio-Energy, the Brazil-based ethanol manufacturer, to acquire the state-owned sugar company.
But as part of the deal, the Government will also hand over the 40-million gallon Petrojam Ethanol plant to Newco Ltd, the Infinity subsidiary that will operate in Jamaica, as well as absorb an estimated J$18 billion of debt owed by the Sugar Company of Jamaica (SCJ), ahead of its divestment.
The Government will also cover the redundancy payments of up to J$3 billion for an estimated 13,000 people who will lose their jobs with the Infinity acquisition, the Agriculture Minister, Chris Tufton, confirmed.
Essentially, the Government will end up paying out J$21 billion to rid itself of the loss-making assets.
Jamaica's upfront cost
Newco is to be capitalised at US$100 million, but Jamaica, as part of its share in the company, must upfront US$25 million, the same amount it is being paid for SCJ.
Prime Minister Bruce Golding and Infinity bosses last week signed the broad agreement for the firm's take-over of the state-owned SCJ, in what will be the second attempt of its divestment in a dozen years.
In the mid-1990s, the Government sold the five major sugar factories and thousands of acres of sugar cane land to a consortium that brought together the British sugar outfit Booker Tate and local interests.
But the deal fell apart after a few years when the purchasers claimed that the former People's National Party administration failed to meet commitments and that its economic policies, including allowing a revaluation of the Jamaica, helped to make the business unviable.
Ethanol primary focus
While the industry here will continue to produce sugar for the domestic, European Union and United States markets, the primary focus will be ethanol - an area in which Brazil is a leader and Infinity Bio-Energy is a major player.
The company is to take full control of Petrojam Ethanol - currently described in Finance Ministry documents as a 'full subsidiary' of the Petroleum Corporation of Jamaica - but the full contents of that deal were not immediately clear.
Aggressive acquisitions
Registered in Bermuda, Infinity, a partnership between US private investment outfits and Brazilian partners, has been aggressively acquiring sugar cane plantations and ethanol factories in Brazil.
It also recently made a significant acquisition in the Dominican Republic.
The Jamaican deal is its first foray into the English-speaking Caribbean.
All the specifics of the agreement are yet to emerge, but Infinity will acquire the Monymusk, Frome, Bernard Lodge, Long Pond and Duckenfield sugar factories, and up to 100 acres of land around each factory.
The company will then lease additional lands from the Government.
Infinity is expected to upfront US$75 million of investment that it projected it will require to recapitalise the facilities and develop ethanol plants.
Quarter ownership
The Government will own a quarter of the business.
Otherwise, the sale price, Agriculture Minister Dr Christopher Tufton explained, includes Petrojam Ethanol Limited (PEL) and the five state-owned factories.
According to Tufton, ethanol production is expected to reach around 80,000 kilolitres in Infinity's first year of operation and jump to 135,000 kilolitres by 2013.
Ironically, the Petrojam ethanol plant Infinity will inherit under this deal was rebuilt in 2005 as a joint venture with another Brazilian firm, Coimex, which had initially signalled its intention to bid on the Jamaican sugar industry. It did not follow through.
Meeting Infinity's target for ethanol production will demand an increase in sugar cane production, from an estimated 1.4 million tonnes next year, to 2.5 million tonnes in 2013. A significant portion of the increase will come from private growers.
Infinity's operation will include co-generation, with a project of 138 gigawatts of electricity by 2011, increasing to 168 gigawatts by 2013.
"These figures represent net production to be sold to the national grid, after having satisfied their internal energy demand," Tufton said.
The Jamaican Government will apparently receive no cash, but instead get a 25 per cent stake valued at US$25 million (J$1.8 billion) in the vehicle being used by Infinity Bio-Energy, the Brazil-based ethanol manufacturer, to acquire the state-owned sugar company.
But as part of the deal, the Government will also hand over the 40-million gallon Petrojam Ethanol plant to Newco Ltd, the Infinity subsidiary that will operate in Jamaica, as well as absorb an estimated J$18 billion of debt owed by the Sugar Company of Jamaica (SCJ), ahead of its divestment.
The Government will also cover the redundancy payments of up to J$3 billion for an estimated 13,000 people who will lose their jobs with the Infinity acquisition, the Agriculture Minister, Chris Tufton, confirmed.
Essentially, the Government will end up paying out J$21 billion to rid itself of the loss-making assets.
Jamaica's upfront cost
Newco is to be capitalised at US$100 million, but Jamaica, as part of its share in the company, must upfront US$25 million, the same amount it is being paid for SCJ.
Prime Minister Bruce Golding and Infinity bosses last week signed the broad agreement for the firm's take-over of the state-owned SCJ, in what will be the second attempt of its divestment in a dozen years.
In the mid-1990s, the Government sold the five major sugar factories and thousands of acres of sugar cane land to a consortium that brought together the British sugar outfit Booker Tate and local interests.
But the deal fell apart after a few years when the purchasers claimed that the former People's National Party administration failed to meet commitments and that its economic policies, including allowing a revaluation of the Jamaica, helped to make the business unviable.
Ethanol primary focus
While the industry here will continue to produce sugar for the domestic, European Union and United States markets, the primary focus will be ethanol - an area in which Brazil is a leader and Infinity Bio-Energy is a major player.
The company is to take full control of Petrojam Ethanol - currently described in Finance Ministry documents as a 'full subsidiary' of the Petroleum Corporation of Jamaica - but the full contents of that deal were not immediately clear.
Aggressive acquisitions
Registered in Bermuda, Infinity, a partnership between US private investment outfits and Brazilian partners, has been aggressively acquiring sugar cane plantations and ethanol factories in Brazil.
It also recently made a significant acquisition in the Dominican Republic.
The Jamaican deal is its first foray into the English-speaking Caribbean.
All the specifics of the agreement are yet to emerge, but Infinity will acquire the Monymusk, Frome, Bernard Lodge, Long Pond and Duckenfield sugar factories, and up to 100 acres of land around each factory.
The company will then lease additional lands from the Government.
Infinity is expected to upfront US$75 million of investment that it projected it will require to recapitalise the facilities and develop ethanol plants.
Quarter ownership
The Government will own a quarter of the business.
Otherwise, the sale price, Agriculture Minister Dr Christopher Tufton explained, includes Petrojam Ethanol Limited (PEL) and the five state-owned factories.
According to Tufton, ethanol production is expected to reach around 80,000 kilolitres in Infinity's first year of operation and jump to 135,000 kilolitres by 2013.
Ironically, the Petrojam ethanol plant Infinity will inherit under this deal was rebuilt in 2005 as a joint venture with another Brazilian firm, Coimex, which had initially signalled its intention to bid on the Jamaican sugar industry. It did not follow through.
Meeting Infinity's target for ethanol production will demand an increase in sugar cane production, from an estimated 1.4 million tonnes next year, to 2.5 million tonnes in 2013. A significant portion of the increase will come from private growers.
Infinity's operation will include co-generation, with a project of 138 gigawatts of electricity by 2011, increasing to 168 gigawatts by 2013.
"These figures represent net production to be sold to the national grid, after having satisfied their internal energy demand," Tufton said.
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