St. Maarten starts case against Saba, Statia for GEBE shares

November 16, 2010 11:38 AM

PHILIPSBURG--The government of St. Maarten will start arbitration proceedings against St. Eustatius and Saba in order to have the shares of NV GEBE divided.

Minister in charge of GEBE and utilities Theo Heyliger confirmed that he has approved the arbitration proceedings and law firm Lexwell and Associates has already been selected to represent St. Maarten.

Heyliger said, "St. Maarten can no longer wait on the other two islands to decide on the division of shares. No longer should St. Maarten be subsidising Saba and Statia as they now are part of the Netherlands. We have waited long enough. St. Maarten wants to see an end to the constant problems of blackouts and seaweed problems. Investments must now be a priority for our population."

The fact that Heyliger would approve such a move is not surprising considering his public stances that St. Maarten has been subsidising the operations on Saba and Statia for years and at losses in the millions. Moreover, Heyliger has argued that as Saba and Statia are now public entities under Holland, the Dutch should assume responsibility of utilities on those islands.

It is not clear what ratio of division St. Maarten will seek, but Heyliger has made it clear in the past that St. Maarten would want 100 per cent of the shares and would "allow" Saba and Statia to keep the operations there and accompanying assets at no cost. Heyliger has also argued that with the constitutional changes, it's in the best interest of Saba and Statia to secure their operations.

The Government of St. Maarten will next advise Saba, Statia and GEBE's Shareholder Foundation of its intentions. It should be noted that the foundation is the legal owner of the shares based on a protocol that was sign in 2005 among Saba, Statia and St. Maarten.

In that protocol it was stipulated that the shares of GEBE would be transferred and later divided among the islands of Saba, Statia and St. Maarten. Although it was not clear how the shares would be divided, the process should have been done by late 2006, it never was.

In mid 2010, Minister Heyliger engaged BES Commissioner Henk Kamp to discuss the future of GEBE. As a result of these meetings, Kamp involved the Ministry of Economic Affairs in The Hague and they had a study done on the cross subsidisation of GEBE. As a follow up to this study, they contracted a consultant to study ways of solving this issue and splitting the shares of GEBE among the islands.

The representatives of both Saba and St. Eustatius objected to the proposed division of shares as presented by the Ministry of Economic Affairs of The Netherlands. Heyliger sees this as Saba and Statia being unwilling to resolve the issue and have approved the arbitration proceedings. These proceedings would include a number of administrative and accounting steps before finalisation or agreement could be arrived at.

The operations of GEBE on Saba and Statia have lost approximately NAf. 12 million from 2007 to 2009. The findings were outlined in a report from the Dutch firm Deloitte dated June 17, 2010 which was commissioned by the Dutch Ministry of Economic Affairs through a request by Kamp.

The report identifies the high cost of fuel that Saba and Statia use (light fuel compared to the cheaper heavy fuel on St. Maarten) as well as very high operational cost, as some of the reasons the operations on those two islands continue to lose money. The indirect cost on Saba from 2007 to 2009 averaged NAf. 554,000 per year or approximately 17 per cent of the total operational cost. On Statia, the indirect cost from 2007 to 2009 averaged NAf. 714,000 per year or approximately 19 per cent of that island's operational cost.

Additionally, the operational cost relative to the revenues on Saba and St. Eustatius is also much higher than on St. Maarten. On Saba operational cost is some 40 per cent higher than St. Maarten and on Statia more than 30 per cent. As a result, Saba and Statia consistently record net losses while St. Maarten records a profit that subsidises the losses of the other islands.

Based on their comments earlier this year, the government and Saba and Statia are expected to draw a hard line on the subject. Both Executive Councils have stated that they do not agree with Minister Heyliger's approach, claiming that they should get their "fair share" of GEBE..

(Source: The Daily Herlad St. Maarten)

16 November 2010