Davies THE HOUSE of Representatives on September 12 authorised the Government to guarantee a US$50 million loan to the Port Authority of Jamaica and US$125 million loan to the Bauxite and Alumina Trading Company (BATCo.)
According to a JIS release, Dr. Omar Davies, Finance and Planning Minister, told the House that the loan to the Port Authority would be used to expand Gordon Cay and carry out the third phase of the development of Port Bustamante, Kingston.
He said the China Import/Export Bank had provided US$17.8 million for the expansion of Gordon Cay and the European Investment Bank had provided 35 million euros; both loans are at an average interest rate of three per cent per annum.
Dr. Davies said the US$125 million loan to BATCo. represented the price of alumina sold on the forward market to Glencore on behalf of Clarendon Aluminum Partners (CAP).
He explained that payment by Glencore was refinanced by the issuing of ten-year notes on the international capital market on July 6, 2000, at a coupon rate of 10.48 per cent, with interest paid quarterly.
"To facilitate the transaction a special purpose vehicle, Alumina Enterprises Limited, domiciled in the Cayman Islands, was created to issue notes to international investors," the Minister said.
He disclosed that BATCo had entered into a long-term agreement to supply Glencore with an aggregate volume of 5.1 million tonnes of alumina over ten years. The proceeds from the sale will be used to service the notes.
Noting that the price of the alumina sold under the agreement was linked to prevailing rates for aluminium ingot on the London Metal Exchange, Dr. Davies said the notes were issued with the understanding that "Government would stand behind CAP and BATCo if they defaulted on their obligations under the deal."
He argued that a default could occur if, for example, there was a shortfall in CAP's production targets.
The Finance Minister explained that CAP had used the loan proceeds to retire US$47.2 million of existing debts and liabilities to the Government and other creditors, US$17.7M was paid to the Government to cover outstanding portions of the bauxite levy and US$55.5M was used as pre-payment for six year's worth of the bauxite levy. The remaining US$4.6M was used to finance "plant maintenance obligations," he added.
Disclosing that the Government had created CAP as a "strategic response" to keep the refinery open after ALCOA unilaterally closed it 1985, Dr. Davies said the investment has been good for the country and the Government.
The Government, he added, now owned 500,000 tonnes of annual alumina capacity with 225,000 tonnes resulting from CAP's input. The company's cumulative contribution to the Jamaican economy at the end of 1999 was about US$465 million, he reported.
Audley Shaw, Opposition Spokesman on Finance, supported the motions for the Government to guarantee the loans to BATCo and the Port Authority of Jamaica.
