Ber­bice Bridge toll in­creases could have been avoided had APNU+AFC lis­tened to the PPP

Stabroek News Sunday - - REGIONAL NEWS -

Dear Ed­i­tor, The Ber­bice Bridge Com­pany Inc (BBCI) has held both the PPP and APNU re­spon­si­ble for not hon­our­ing in­creases in tolls pur­suant to the Ber­bice Bridge Act and the Con­ces­sion Agree­ment. The Ber­bice Bridge is a PPP project which has been heav­ily crit­i­cised by APNU+AFC. In fact, in 2013, even be­fore the tolls were sched­uled to change, APNU sought to po­lit­i­cally sab­o­tage the Ber­bice Bridge by propos­ing a mo­tion in Par­lia­ment to re­duce tolls. This mo­tion was passed in May of 2014 and pro­posed re­duc­ing tolls by over half. APNU’s ac­tions scared in­vestors in the bridge, who be­came con­cerned both about their ex­ist­ing in­vest­ment and about rein­vest­ing funds back into the bridge. By 2015, when a larger toll in­crease was needed, elec­tions de­ferred all de­ci­sions. In the re­sult­ing change, from the PPP to the APNU+AFC Gov­ern­ment, APNU+AFC in­her­ited a prob­lem of their own mak­ing.

In 2014, when I was Pres­i­dent, we met with the Ber­bice Bridge Board with the ob­jec­tive of find­ing ways to avoid a toll in­crease while at the same time en­sur­ing that the Ber­bice Bridge was able to hon­our its obli­ga­tions. We viewed the toll lev­els like the way GPL han­dled its tar­iffs to main­tain a con­stant level of tar­iffs, de­spite ris­ing and fall­ing oil prices. Our so­lu­tion was sim­ple—given that tolls were only go­ing up to se­cure cash to re­duce debt, Gov­ern­ment would sup­port in­vestors, rein­vest­ing some monies at a lower in­ter­est rate, and have this re­paid in the last few years of the bridge con­ces­sion. Un­der this sce­nario, tolls would not go up, but it would also not go down as quickly as pro­jected. Other so­lu­tions in­cluded in­creas­ing the life of the con­ces­sion, but this was viewed as less prefer­able than so­lu­tions pos­si­ble over the re­main­ing life of the con­ces­sion.

In 2006, ev­ery in­vestor re­ceived a fi­nan­cial model that con­tained a toll in­dex. I have no doubt that the PPP has no ob­jec­tion to this model be­ing made pub­lic. The fi­nan­cial model showed that tolls would re­main con­stant un­til 2014. In 2014, tolls were sched­uled to in­crease by 6.4 per cent and again in 2015 by 17.3 per cent. There­after, tolls would start drop­ping. The ta­ble be­low shows the toll in­dex and the per­cent­age change in tolls from the prior year. The last col­umn shows how much a ve­hi­cle would pay based on this toll in­dex and us­ing the tolls in ex­is­tence since the start of the bridge. De­spite the modest in­crease in 2014 and 2015, it fell in the fol­low­ing years, such that by 2019, tolls were pro­jected to be lower than in 2008 when the bridge opened.

The key rea­son tolls were sched­uled to go up from 2014, was that debt re­pay­ment started in 2014. Prior to 2014, only in­ter­est was be­ing paid. But as debt was re­paid, less money was needed for in­ter­est ex­pense. By 2019, tolls were pro­jected to be lower than 2008, and by

2021, tolls were pro­jected to be sub­stan­tially be­low where it was in 2008, fall­ing over 40 per cent over 2020. In 2026, the bridge would be handed back to Gov­ern­ment at no cost, and fully re­paid. By that time, tolls would be al­most neg­li­gi­ble.

Some per­sons have ar­gued that the Ber­bice Bridge fi­nan­cial model was flawed. We in the PPP be­lieve the op­po­site. The bridge has per­formed largely as pro­jected. In fact, as the fol­low­ing ta­ble (based on au­dited fi­nan­cial state­ments of BBCI) shows, in ev­ery year, toll rev­enue was greater than pro­jected. The ta­ble shows that as the Ber­bice Bridge re­paid debt, its in­ter­est ex­pense started to re­duce. In fact, dur­ing the 20092017 pe­riod, ac­tual rev­enue was G$2 bil­lion more than pro­jected rev­enue. Dur­ing the same pe­riod, the BBCI re­paid over $2.3 bil­lion in debt. An­nual in­ter­est ex­pense which peaked in 2013 at $789 mil­lion, was re­duced to $636 mil­lion in 2017, a re­duc­tion of $150 mil­lion. This trend would con­tinue as debt is re­paid.

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