Tue | Jan 22, 2019

GOJ seeks self-financing rail operation, three show interest

Published:Wednesday | September 3, 2014 | 12:00 AM
The Jamaica Railway Corporation station on Pechon Street in Kingston.-Norman Grindley/Chief Photographer

Avia Collinder, Business Reporter

With its main aim being to avoid new financial obligations, the Government of Jamaica is pressing ahead to put the railway back on track by soliciting investors with a game plan.

Milverton Reynolds, managing director of the Development Bank of Jamaica, said Tuesday that three firms have expressed an interest in the rehabilitation of the rail service, but no negotiations have commenced.

The DBJ is handling the divestment of the service operated by Jamaica Railway Corporation.

Expressions of interest in the rail project, Reynolds said, will be scrutinised for their ability to implement the plan proposed.

"The GOJ is seeking to identify an investor with adequate financial and technical capacity to undertake the rehabilitation, development, operations, management and maintenance of rail transportation in Jamaica. The final structure of the transaction has not yet been determined, however, the GOJ is reviewing the preferred modality to proceed," he said.

The prospective investors have been provided access to information on the operations to facilitate their submission of proposals, he said.

While he declined to name the interested parties, two of them were previously identified by minister of transport, works and housing, Dr Omar Davies, as Herzog Contracting Corporation and Railmark Holdings Limited.

An Enterprise Team to oversee the selection of an investor was approved on December 16, 2013.

Davies stated that both companies submitted business plans by the March 31, 2014 deadline. Subsequently, the DBJ was informed of the interest of a third firm, which was asked to provide evidence of its capability.

The GOJ is also in the process of conducting pre-market due diligence for sections of the railway that are deemed commercially viable.

"This approach is necessary in the event that a suitable partner is not identified to restore the entire rail network, and the GOJ decides to pursue the alternative strategy of extracting greater value from a break-up of the Jamaica Railway Corporation's (JRC) assets," Davies said during the sectoral debate.

The Jamaica Railway service rolled to a stop in 1992. The Jamaican Government has been trying to find a buyer since 2009.

In 2011, it placed several lots owned by Jamaica Railway Corp on the market for sale. The company was then custodian of some 2,880 acres of land throughout the railway system. At the time, the National Land Agency had valued station premises throughout the island at $3 billion.

Reynolds says the assets now include rolling stock and land holdings of approximately 1,000 hectares. That translates to around 2,470 acres.

"The GOJ is not in a position to share the value of property at this time given the current stage of the privatisation process," he said when asked for a current valuation.

Asked whether the assets will be sold en bloc or split up for sale, Reynolds said "the assessment which will inform the final strategy is still in progress".

"The GOJ's vision for the railway system as outlined in the National Transport Policy is one that provides a safe, economic, reliable and efficient transport service for the movement of passengers and freight across the island," he said.

A recommendation on the mode of divestment will be submitted to Cabinet, which will then decide on the strategy and structure of the transaction, the development banker said.