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Caribbean Cement Company Limited supply deal hangs in the balance

World Cement,

The deal is being negotiated under the ‘crude for commodities’ component of the PetroCaribe agreement between Jamaica and Venezuela, which allows for part-payment of oil with goods.

CCC Chairman, Brian Young disclosed to shareholders that the Kingston plant hoped to begin supplying cement to Venezuela in early 2013.

In Venezuela, cement demand is high. Recently reported plant-expansion will go a long way towards supporting Government plans to build 300 000 houses pa over the next six years, as well as developing the transport and energy infrastructure necessary to keep up with the expansion, and the agreement with CCC would likewise cater to the increase in demand.

However, finalisation of the contract has been delayed so far by the illness of Venezuelan president, Hugo Chávez, and because the deal’s completion is now overdue, it faces the challenge of a potential change of government when the country’s residents go to the polls on 7 October 2012.

Local press reports that Chávez is currently considered to be leading narrowly in opinion polls with his opponent, Henrique Capriles, close behind. It is widely expected that a new Venezuelan administration would, at the very least, seek to alter the PetroCaribe agreement, which naturally, would have a knock on effect on dependent deals.

CCC’s supply deal makes use of PetroCaribe’s ‘Trade Compensation Mechanism’. The company disclosed the arrangement in its 2011 annual report. General Manager Anthony Haynes has not responded to requests for comment on the structure of the arrangement and how big a contract the company is negotiating. The company's 2Q12 financial report, released in August, vaguely refers to continuing negotiations for a three-year supply contract with an unnamed party. The report states that this contract is expected to "make a significant contribution to the group's forecasted turnover and net cash flow over the contract period."

If agreed, it will be the first such crude-for-commodities arrangement for Jamaica ­and will follow the company’s recent trend of expansion into export markets – including Haiti, Eastern Caribbean and Dominican Republic – in order to offset diminishing local demand.

Edited from various sources by Jack Davidson.

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