The Oilfields Workers’ Trade Union (OWTU) has not shown it has the ability to raise the US$500 million required to purchase the Petrotrin Point-a-Pierre refinery and as a result, the Government is proceeding to immediately return to the open market to seek suitable parties interested in operating the facility.
Energy Minister Franklin Khan made the disclosure yesterday during a joint news conference with Finance Minister Colm Imbert, in which Imbert insisted that after a year of negotiations the OWTU simply could not meet the financial requirements of the deal.
“All that Patriotic was able to produce at that time was a letter from RBC saying they were interested in assisting Patriotic. They gave no guarantee of providing funding, they gave no commitment on providing funding, they gave no timeframe, they gave no terms, so it was not a suitable offer,” Imbert told the virtual media briefing.
The Finance Minister insisted that the lien (a right to keep possession of property belonging to another person until a debt owed by that person is discharged) was not the problem, although OWTU president Ancel Roget yesterday insisted to Guardian Media that this was at the heart of the challenges.
To understand the issue better, one has to remember that the Petrotrin refinery was heavily leveraged with significant debt. When the Government decided to close down the refinery, it had to come to agreements with the bondholders, who owned part of the debt of the former Petrotrin.
The bondholders have first lien on the Point-a-Pierre refinery, meaning if it is sold, they have to get their money first. It is in that context that the offer by the Government to Patriotic in 2019 to get access to the plant and pay the money at a later date, could not stand.
With this in mind and having worked out the present value of Patriotic’s initial offer of US$700 million, the figure of US$500 million was arrived at.
The ministers said the Government would return to the open market because it felt that too much time had elapsed to negotiate with Patriotic’s second placed offer. Asked what would be the minimum amount of money the state can be expected to settle on for sale of the plant in the context of the bondholders having to be paid, Imbert was coy, not being prepared to say what that is.
Energy Minister Franklin Khan said while Government wants the refinery restarted, it was not prepared to put state funds back into it.
“We want it to run without State capital, without State interjection and without State funding. We have disaggregated Heritage and Paria, which has been successful. The refinery was always the cancer in Petrotrin and if some other entity can see it fit to restart the refinery in a profitable business model, that is what the Government wants,” Khan told the news conference.
On October 29 last year, Patriotic submitted a proposal for the purchase of the Petrotrin refinery. However, two days later, on October 31, Khan announced that Government had rejected Patriotic’s proposal. Noting that both parties were bound to non-disclosure agreements in these discussions, he said the key issues at the end of prolonged discussions were the purchase price financing, the restart financing and first priority lien on the assets.
“After much to-ing and fro-ing, exchange of letters and a series of meetings involved with the negotiating team, the Honourable Prime Minister and the Honourable Minister of Finance gave the parties an October 31 deadline to reach an agreement on the sale of the captioned asset,” Khan said then, adding the proposal did not address key outstanding issues and therefore did not meet the necessary criteria.
But after OWTU president general Ancel Roget asked the Government to revisit the deal, Prime Minister Dr Keith Rowley instructed the evaluation committee to take a second look at the proposal and make further comments and recommendations. That report was submitted to Cabinet on November 30, 2020.
The refinery remains closed and there have been questions about the cost of the restart and whether Patriotic had the resources to make it work, both in terms of financial and management. There are estimates that to safely restart the refinery could cost in excess of US$500 million and more likely close to a billion US dollars.
Patriotic is wholly-owned by the OWTU.
In October 2018, Government decided to restructure Petrotrin.
The company was broken into subsidiaries, including Heritage, Paria Fuel Trading, Guaracara Refining and Petrotrin.
On May 21, 2019, Guaracara and Paria assets went to five short-listed bidders, including Patriotic Energies.
The following month, the Cabinet appointed an evaluation team headed by Vishnu Dhanpaul, the permanent secretary in the Ministry of Finance.
On September 20, 2019, Finance Minister Colm Imbert announced in Parliament that Patriotic was the preferred bidder and had offered an upfront payment of US$700 million for the refinery, plus US$300 million got its non-core assets.