OWTU blanked a third time over refinery purchase

THE Government on Thursday, for a third time, rejected an offer by its preferred bidder Patriotic Energies and Technologies Company to buy the Guaracara refinery. The refinery will go back onto the open market.

At the post-Cabinet media briefing at the Diplomatic Centre, St Ann's, Finance Minister Colm Imbert said the company had only made proposals, but no firm binding offer.

"Cabinet felt we could not proceed with this matter and we would have to revert to the decision we made previously (that is, the open market).

Last October the Government rejected Patriotic's bid, but relented to give an extension for another bid which was also rejected in January.

A second extension ended with the rejection on Thursday.

With the TT budget predicated at US$45 per barrel and oil now at US$63, Imbert said the covid19 pandemic had likely cut global capacity (by closures and cutbacks) leading to an uncertain oil market, which could all give viability to the refinery.

Imbert said Patriotic offered two options, neither of which seemed palatable.

The first proposal was to give Patriotic huge tax-credits saleable to companies like BP to reduce their tax liability, while the second option he likened to a state-funded hire-purchase deal.

Option one, he said, was for the Government to issue Patriotic some US$750 million in tax credits, divisible and transferable, saleable to any third-party.

Patriotic or Credit Suisse, a Switzerland-based bank with which Patriotic said it was in talks with to acquire capital for the purchase of the refinery, could sell these to an energy firm to offset the latter's tax liability but, in so doing, reduce government’s revenues by $5 million, he said.

Patriotic would receive free access to the assets of Guaracara, which is the refinery, and Paria at no cost to Patriotic.

"All expenses and risks are to be borne by the Government in the form of the initial capital by way of the $5 billion."

Imbert said, after all this Patriotic would own the assets on a free and fair basis and be able to pledge or mortgage them for future financing at no risk to themselves.

"A related risk is that Patriotic would also be able to pledge the assets for financing that has no relationship to the start-up of the refinery." By this the country could lose the assets, he warned.

Imbert spelt out the second option.

"This requires the execution of a receivables purchase agreement between Patriotic and Credit Suisse where the purchasers agree to buy the asset from Trinidad Petroleum (holding company for Heritage, Paria and Guaracara.)

"A loan of US$500-US$550 million is arranged by Credit Suisse and the Government is required to service the loan.

"This would entail a legal, valid, binding and irrevocable obligation, enforceable against the Government."

The Government would co-sign and guarantee the loan, pay US$127 million each year for seven years, or $6 billion over the period, while Patriotic gets ownership of the refinery and the Paria Fuel Trading Company. Patriotic could pledge the assets for financing unrelated to the refinery's start-up. "The greatest risk for the Government would be loss by Patriotic of state assets that Patriotic did not pay for."

Saying the Government was asked to fund both options ($5-6 billion), he lamented Credit Suisse's funding would go to the original Petrotrin bondholders, not the Government.

Imbert said Cabinet will now tell Patriotic it will no longer have exclusivity over the bid process and the refinery will now be put on the open market, with Trinidad Petroleum to soon give Cabinet proposals to canvass the market.

Saying Patriotic's offers were too burdensome, Imbert said Trinidad and Tobago was being asked to buy its own asset, give it away for nothing and let it be mortgaged out.

Energy Minister Franklin Khan said no state resources will be put into the refinery as it heads back onto the open market. Imbert said it was never envisaged for the Government to be asked to pay for its own refinery. He said a new request for proposals will be drafted in three weeks.