Belize Sugar Industries (BSI) is reporting that it will be forced to temporarily close down operations at the Tower Hill processing factory for “up to four weeks” after two steam turbines generating about 25 megawatts worth of electric power to supply the sugar mill, as well as power for Belize Electricity Limited (BEL), developed serious problems in the past few days.
The closedown threatens to throw a spanner in the works of the plans developed last November in the wake of Government’s $10-million bailout of the company after former international banking partners ING of the Netherlands, First Caribbean International of Barbados and a consortium of development banks, including the Caribbean Development Bank (CDB), called in more than $124 million in loans and cut off their overdraft facility, which delayed the final payment to cane farmers for the 2009-10 season by several weeks.
In a Memorandum of Understanding signed in Belmopan on November 23, 2010, BSI and the Belize Sugar Cane Farmers Association (BSCFA) had agreed to deliver and grind 1.1 million tons of quality cane to Tower Hill and produce 115,000 tons of sugar in 30 weeks, among other things.
To date, BSI has produced 30,580 tons of sugar from 275,376 tons of cane delivered, about a ratio of 9 to 1, putting them ahead of the expected target. Due to dry weather, BSI has reduced its estimate of cane to be delivered to 1,050,000 tons, leaving 775,000 tons remaining to be ground within 19 weeks, which they hope means that the crop will be finished within the 30 weeks assigned and the 115,000-ton output, the largest since 2004, will still be achieved.
But there is still the problem of the back-pressure steam turbine, or Turbine A, and the extraction condensing steam turbine, Turbine B.
Turbine A suddenly developed internal problems around January 20, which caused it to deliver less power. According to BSI/Belcogen, “there had been no previous indication of reduced output and the machine had been operating normally…normal routine maintenance procedures carried out during the off-crop season did not reveal any abnormal conditions.”
More recently, Turbine B began showing similar problems and it was recommended that it too be taken out of service. Both machines will be cleaned at a service facility in Guatemala, with assistance from a qualified Mexican specialist engineer who will inspect the machines and an American engineer who will supervise their dismantling.
BSI/Belcogen assures that their equipment has not been damaged, and maintains that they can meet their quotas for the European Union (EU) and the United States, only recently renewed after a succession of poor seasons, but maintains that this was their “only viable option” and the “shortest possible route to the early resumption of normal operations.”
For BSI chief exec Joey Montalvo, it represents an “opportunity lost” to ship sugar earlier. Montalvo estimates that for the four weeks or so that the turbines will be down, the company will be paying out some $250,000 to $300,000 in wages to its employees per week, “to do almost nothing.”
In terms of revenue from sugar production and power generation and sales of electricity to Belize Electricity Limited (BEL), Montalvo told us that the actual loss would be “difficult to determine” because it represents mainly potential earnings. He estimates that some 16,000 tons of sugar would have been ground per week.
As for what caused the machines to become soiled, an inspection by an expert from Mexico and a subsequent chemical analysis prior to the cleaning in Guatemala will help BSI get to the bottom of that.
As of this evening, there are no trucks in line at Tower Hill, and all outstanding deliveries were completed earlier in the day. BSI will undertake a comprehensive review of its other machinery to ensure that no further problems develop.
And while BSI waits, they also continue to grapple with their financial situation. Montalvo told us that he knows nothing “formally” of any plans by foreign investors to buy out the Tower Hill operations; he did confirm, as was hinted at last November, that representatives of Honduras’ Banco Atlántida (parent company of Belize’s Atlantic Bank Limited) made a visit to Belize and after some meetings, indicated interest in being part of any future lending consortium that would replace ING and FCIB.
While BSI says that it has spoken with both the BSCFA and Sugar Industry Control Board (SICB) and assured that it would do its part to minimize “any possible overall effects on sugar production,” the BSCFA remains concerned.
Association Chairman Alfredo Ortega told us that the shutdown will “create hardship for farmers,” though he understands and accepts that no one could have foreseen this scenario. The Association’s primary concern is that their cane will be left in the fields at peak time of maturity for harvesting, which risks a loss of valuable sucrose content, and also that an extension of the season would conflict with the rainy season and potentially hamper the targets set last November.
Ortega pointed out that the farmers had been cooperating in the new quality improvement system implemented last year, and as a result had significantly improved on last year’s dismal performance.
The Association intends to closely monitor the situation and yesterday began to distribute herbicide to cañeros for use in the fields, aiming to prevent any losses that could be incurred in the three to four weeks they will be waiting.
“This is not good for us, but we have no other option than to ride with the program and hope things work out,” Ortega said.
The Government is also monitoring the impact the closedown will have on national finances. Hugo Patt, the chair of the SICB, told Amandala this evening that they expect to see negative effects on the economy in terms of the delay of foreign exchange caused by the close-down, but had not yet quantified that loss; he said they would have some estimates next week after obtaining and sorting out the necessary information.
Apart from the blow to the farmers, the general impact is expected to be less than originally thought, partially because the dry weather has reduced the crop forecast.
Senator for Business, Godwin Hulse, told us this evening that in terms of quantifying how much Belize loses per day during the time period that the factory is idle, we should not expect to lose money from our sugar sales, and farmers are expected to be paid on time as normal. There is a cost in terms of paying employees of the factory and other issues, but nothing significant, he said.