OCG now blamed for high debt to UC Rusal

BY INGRID BROWN Associate editor -- special assignment browni@jamaicaobserver.com

Thursday, June 12, 2014

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MANAGING Director of Jamaica Bauxite Mining Limited (JBM) Coy Roache yesterday stopped short of blaming the Office of the Contractor General (OCG) for Jamaica's debt to UC Rusal climbing from US$14 million in 2011 to the current US$21 million.

The cash-strapped country, according to Roache, would have been able to save US$7 million if Government had intervened in the OCG's decision to have a second valuation done on Jamaica's seven per cent stake in the West Indies Alumina Company (WINDALCO).

Roache told journalists at yesterday's weekly Jamaica House press briefing at the Office of the Prime Minister in Kingston that in 2011 when attempts were made to sell the seven per cent stake to WINDALCO's Russian-based parent company UC Rusal the debt was at $14 million. The assets, he said, were then valued at US$11 million, which meant that Jamaica would only have had to find an additional US$3 million to clear what was owed to the company.

"Now the debt is $21 million and the value (of the assets) is still US$11 million," Roache told journalists.

He explained that although both JBM and UC Rusal used international company American Appraisal to value the assets, the OCG insisted that a second valuation should be sought.

"We went to OCG and they distinctly say 'the law says two valuations' (and) there was no flexibility at all. I was written to and told to do a second one and it cost us J$18.5 million to hire another company to do a second valuation and then it ended up costing us J$710 million more to pay UC Rusal because the debt grew over that period," Roache lamented.

Meanwhile, Roache said in the eight years he has been at JBM, Government's seven per cent stake has never realised net positive cash flow.

"The cost of production of the Ewarton plant, for example, far exceeds the world price for alumina so we have been at a lost and it would have been significantly higher. If we had not put things in place, some strategies we used earlier, it is $40 million we would have owed," he said.

Energy minister Phillip Paulwell announced in Parliament on Tuesday that Jamaica will not pocket a dollar from the sale of its seven per cent share in WINDALCO, since the money will be used to pay off a portion of the US$21.15-million debt to UC Rusal.

Yesterday, Roache said the remaining US$10 million has already been found and is now sitting in the bank to clear the remaining debt.

In the meantime, minister with responsibility for information, Senator Sandrea Falconer yesterday refuted the Opposition Jamaica Labour Party's (JLP) claim that Government continues to ignore established channels on procurement such as the OCG.

The JLP's comments were in light of the establishment of the Electricity Sector Enterprise Team.

"The Government has the right, based on our own legal advice, to disagree with opinions from the OCG and I think in this case, the legal advice that was received by the Cabinet was not in accordance with the OCG," Falconer told the press briefing.




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