The Oilfields Workers’ Trade Union (OWTU) believes the government did not fairly manage Patriotic Energies and Technologies Company’s (Patriotic) bid to acquire the Guaracara Refining Company and the Paria Fuel Trading Company.
OWTU president-general Ancel Roget now questions whether the government or its agents had parallel discussions with another interested party during the negotiations.
“I genuinely feel, consistently along the way, like we have not been treated with the respect that this proposal deserves. Had it been a multinational company, the multinational would have been called in. They (government) would have sat with the multinational and ensured that they understood fully,” Roget said during a media conference at the OWTU’s headquarters in San Fernando yesterday.
Patriotic remains committed to acquiring the former assets of Petrotrin despite the government announcing that it will submit fresh Requests for Proposal for an operator for the mothballed refinery, storage and port facilities in Pointe-a-Pierre. Roget said that in announcing the government’s rejection of Patriotic’s latest proposal, Minister of Finance Colm Imbert peddled several inaccuracies to citizens. Among them was that Patriotic was not being asked to put out any capital while the country is asked to pay to transfer its own assets.
Roget said its financier, Credit Suisse examined the deal and found a way for the government to benefit while not putting out any cash. On January 20, Cabinet requested that Patriotic provide Corporation Sole with a binding commitment from Credit Suisse to finance the acquisition. In Credit Suisse’s response, it presented two options, one which included an agreement that it would pay US$500 on the same day the government issues a transferable tax credit.
While Imbert opposed the proposal of a tax credit, Roget said this was an incentive that this government, like previous, offers to multinational companies seeking to establish their businesses in T&T. It was also documented on the Ministry of Finance website as part of the government thrust to attract Foreign Direct Investment, so he questioned why the government objected to this proposal. He said a tax credit meant that if a multinational company spends $8 billion, the government will forgo $11 billion in revenue over five years as a tax incentive. It is in exchange for the hope that in the sixth year, the government will begin to receive tax revenues from the company.
“It is a risk that has always been taken. This is nothing new. What the government did not say is that under the Patriotic proposal, when the tax credit is granted, the government will immediately receive US$500 million which will translate into $5.5 billion in free cash flow to the government and TPHL.”
He stressed that tax credits were nothing new, but something foreign companies enjoy in T&T.
“Patriotic, a locally owned entity, making US$1billion investment in our country, requested tax credit, similar to those who when they get it, all of their profits are repatriated outside.”
He said Imbert was giving the impression that the government will have to put out $700 million to get the deal done, which was erroneous. Noting that Imbert said the evaluation of the deal was done by technocrats in the Ministry of Finance and did not include himself, Roget questioned their capability. He said Patriotic requested that Imbert meets with a team, which included financial experts from Credit Suisse, but he refused.
Roget said the money for repairs and refurbishment was never an issue. Patriotic already negotiated a US$500 partnership with Trafigura PTE and Credit Suisse provided a binding commitment to finance the acquisition. Roget said Patriotic submitted another proposal, which included an agreement from the Union Bank of Switzerland to finance the overall US$1 billion. He admitted that Patriotic submitted the Union Bank option past the deadline, but said nothing stopped the government from considering it.
Seeking the set the record straight, Roget said Patriotic’s proposal included an upfront payment of US$500 million of free cash flow over the next six years. This will allow Guaracara and Paria’s parent company, Trinidad Petroleum Ltd (TPHL) to immediately retire its US$500 million debt at an interest rate of 10 per cent over six years. He said the reduced debt, would give TPHL a more favourable credit rating which will reduce the cost of borrowing for itself and the government. Patriotic proposed to pay an estimated US$75 million-US$100 million over seven years. When the refinery restarts, US$500 million in foreign exchange will be available annually because the government will be able to purchase fuel in local currency as opposed to the US dollars it currently spends to import fuel. Once the acquisition is complete, the country will benefit from US$500 million in investment from the upgrade and restart of the refinery. Roget said Patriotic expects to make US$200 million in after-tax profit annually, significantly adding more foreign exchange to the local market.
“Patriotic revenues in excess of US$3.5 billion at an average oil price of US$50 translates to GDP growth of approximately 14 per cent. Approximately 4,000 jobs during the refurbishment and restart activities in 2021 and 2022. Over 1,000 sustainable jobs post restart from direct, local third-party maintenance and construction contract employment.”