FSC’s new $17million co-generation plant at Labasa Mill has been lying idle and
unconnected to the FEA grid due to major technical problems with its newly installed boiler.
FSC borrowed $17m from the Fiji Development Bank in 2014 to construct a 10MW power generation plant at the mill. Construction was completed last season by a team of engineers and technicians from India. However, the plant failed commissioning tests carried out late last year and has since remained idle.
Labasa Mill has been selling surplus power to FEA for many years during the crushing season. However, FSC decided to instal a new 10MW cogeneration plant which would be operational all year round and earn additional income to offset the huge losses incurred in its sugar manufacturing operations.
The FDB $17m loan is at an interest rate of 4.5% pa, repayable in monthly instalments of $363,000. It is believed that FSC is unable to meet the monthly instalments, and may seek a revision of the existing loan repayment arrangements.
The Corporation has also been negotiating a $US70 million ($F152m) loan with the Indian Government to construct a 40MW plant at its Rarawai Mill.
Both the projects, reportedly pushed by FSC’s executive chairman Abdul Khan “to return FSC to profitability through sale of electricity to FEA” – are pipe dreams and a misadventure which may further cripple this ailing corporate beast.
In May last year, Khan told local media that work on the 40MW Cogen plant at Rarawai was about to start – a year later nothing has come through. We are reliably informed that the project is being reviewed by Indian Government technical experts and is likely to be scaled down considerably because of uncertainty in obtaining adequate quantities of biomass to fire the plant’s boilers. There are also reports that they have questioned the project costs which appear substantially padded (presumably to allow for kickbacks).
The financial viability of both the plants remain in doubt because of a significant decline in the volume of bagasse produced at the mills as a result of falling cane production. Bagasse is used as fuel to fire the boilers and comes at no cost to FSC from its sugar milling operations.
FSC, as is well known, is a bankrupt corporation whose liabilities exceed its current assets by a whopping $225 million. It has significant debt repayment commitments amounting to $213m. It is totally dependent on government support for its day to day survival – refer FSC’s latest Annual Report (2014) pages 25,26, 64 and 65.
Annual accounts of the Corporation for the financial year ended 31st May 2015 are yet to be published. In the past, they were published by October of the same year.
There is no doubt that FSC is embarked on a binge borrowing spree for dubious projects which Abdul Khan claims will rescue it from its financial morass.
He has been selling these crazy projects successfully to the Prime Minister who has little understanding of corporate affairs, although one may wonder whether there is more to all this than meets the eye!
But let’s not forget that at the end of the day, it is the tax payer who will end up paying for all these preconceived misadvantures.
FSC loans written off at the taxpayers’ expense to date, amount to a staggering $180m. It has further debt repayment commitments of $213million as of the end of its 2014 financial year to which more has been added since.