En­er­gy Re­porter

One of the T&T's largest man­u­fac­tur­ing com­pa­nies, Trinidad Ce­ment Ltd, con­tin­ues to be hard hit by the fall­out from the glob­al down­turn as the com­pa­ny tries to reach agree­ment with its cred­i­tors for the re­struc­tur­ing of close to $2 bil­lion in debt. The com­pa­ny has been meet­ing with its cred­i­tors as it tries to re­struc­ture $1.7 bil­lion in debt it owes, and which it can­not at this time pay, in ac­cor­dance with its pre­vi­ous­ly agreed re­pay­ment plan. In an emailed re­sponse to ques­tions, TCL ac­knowl­edged that it was in dis­cus­sions with its cred­i­tors and ex­pressed con­fi­dence that there will be agree­ment. "The process has been go­ing smooth­ly and we ex­pect that we will com­plete the ex­er­cise by mid-year," the com­pa­ny's spokesper­son Michelle Lang­ton wrote. How­ev­er, sources close to the process tell Busi­ness Guardian (BG) that all has not been smooth sail­ing, with some of the cred­i­tors be­ing con­cerned that they are be­ing asked to "hold more TCL pa­per" and that the com­pa­ny has not been able to make its pay­ments on time.

A source told BG: "While the com­pa­ny is seek­ing to re­struc­ture the debt, they have not paid the mon­ey that has be­come due. In the process, they have tech­ni­cal­ly de­fault­ed on their loan."

TCL, how­ev­er, in­sists that they have not de­fault­ed on any loan say­ing they have sought a mora­to­ri­um on the re­pay­ment so that the re­struc­tur­ing can oc­cur. Lang­ton al­so de­nied that some of its cred­i­tors were un­will­ing to take more pa­per from the com­pa­ny. "We have no in­di­ca­tion of any such sen­ti­ment" she told BG. The com­pa­ny ac­knowl­edges that any re­struc­tur­ing will even­tu­al­ly cost TCL more and in­crease its over­all debt po­si­tion, but ac­cord­ing to Lang­ton, this is in the best in­ter­est of TCL. She wrote: "The cost of bor­row­ing will re­flect slight­ly high­er costs, but this has to be com­pared with the re­lief which will be pro­vid­ed in the short to medi­um-term. TCL will be a stronger com­pa­ny com­ing out of this ex­er­cise and will, there­fore, be more at­trac­tive to in­vestors." TCL has been bad­ly hurt by the fall­out from the fi­nan­cial cri­sis which hurt tourist trav­el and in­vest­ments around the Caribbean. In its third quar­ter 2010 re­port, TCL not­ed that notwith­stand­ing low­er de­mand lev­els, its Trinidad busi­ness­es re­mained prof­itable. Heavy loss­es were, how­ev­er, in­curred by the Ja­maican and Bar­ba­di­an sub­sidiaries due to con­tin­ued de­pressed mar­ket con­di­tions.

Those two mar­kets de­clined by a fur­ther 17 per cent and 20 per cent, re­spec­tive­ly, in 2010. The com­pa­ny told share­hold­ers: "Caribbean economies re­main chal­lenged, even though the eco­nom­ic re­cov­ery in North Amer­i­ca and Eu­rope seems to have start­ed. As a re­sult of the low sales, the kiln in Ja­maica was tak­en out of ser­vice for 40 days in or­der to mon­e­tise high in­ven­to­ries and the Bar­ba­dos plant is un­der­tak­ing a sim­i­lar shut­down in Q4. These low­er plant util­i­sa­tion rates re­sult­ed in ex­pect­ed heavy loss­es due to the high pro­por­tion of fixed costs that are in­curred at each plant." TCL al­so not­ed that the three largest glob­al ce­ment man­u­fac­tur­ers have all re­port­ed re­duced de­mand in their ce­ment mar­kets and sig­nif­i­cant­ly re­duced net in­come for the same pe­ri­od. The com­pa­ny is yet to is­sue its fi­nal 2010 ac­counts, al­though these due on March 31. Alan No­bie, TCL's man­ag­er, in­vestor re­la­tions and cor­po­rate com­mu­ni­ca­tions, said that while he was not at lib­er­ty to speak ex­ten­sive­ly on the debt re­struc­tur­ing due to is­sues of con­fi­den­tial­i­ty, he was con­fi­dent that the com­pa­ny will emerge from the chal­lenges in the medi­um-term. He said al­ready there were signs that ac­tiv­i­ty was be­gin­ning to hap­pen in Caribbean coun­tries and with tourism pick­ing up and gov­ern­ments rev­enues im­prov­ing, he was con­fi­dent TCL will re­turn to prof­itabil­i­ty.

PCS Ni­tro­gen wants to ex­pand

It does not have a con­tract for nat­ur­al gas nor does it have gov­ern­ment ap­proval for a bil­lion-dol­lar ex­pan­sion, but PCS Ni­tro­gen says it will con­tin­ue with its ef­forts to get en­vi­ron­men­tal ap­proval for a US$1.6 bil­lion project it wants to in­vest in at its Point Lisas fa­cil­i­ties. The com­pa­ny's man­ag­ing di­rec­tor, Ian Welch, said PCS was hope­ful that it will even­tu­al­ly get ap­proval for the ex­pan­sion, and, in the in­ter­im, was pur­su­ing the nec­es­sary ap­provals. "We are seek­ing en­vi­ron­men­tal ap­proval, but there is no fi­nal in­vest­ment de­ci­sion be­cause we do not have any gas. As you know, there was re­cent­ly a bid round and our project was not the one se­lect­ed." Gov­ern­ment re­cent­ly an­nounced its ap­proval of Methanol Hold­ing's US$1.7 bil­lion am­mo­nia urea melamine (AUM) om­plex. The new AUM II Com­plex will pro­duce 1,850 tonnes per day of am­mo­nia, which will be used to pro­duce 3,000 tpd urea, 90 tpd melamine, 750 tpd am­mo­ni­um sul­phate and 30 tpd melamine urea formalde­hyde resin (MUF). Welch said PCS was com­mit­ted to T&T and want­ed to con­tin­ue to grow its busi­ness here.

Welch said; "We have been here a long time and we are one of the few com­pa­nies on the es­tate with enough land to ex­pand. We be­lieve that we can grow here and want to ex­pand our pres­ence here."

PCS has four plants that pro­duce am­mo­nia with an an­nu­al ca­pac­i­ty of 2.18 mil­lion tonnes and one plant pro­duc­ing 0.71 mil­lion tonnes urea solids an­nu­al­ly. Welch said: "We have been in­vest­ing here for a long time and we have in­vest­ed in T&T, even dur­ing times that some com­pa­nies were un­will­ing to put their mon­ey here." Un­der the gov­ern­ment's new frame­work for ap­prov­ing new petro­chem­i­cal plants, it has out­lined eight cri­te­ria:

1. Po­ten­tial for val­ue cre­ation and val­ue chain par­tic­i­pa­tion

2. Im­ple­men­ta­tion sched­ule and nat­ur­al gas re­quire­ments

3. En­er­gy ef­fi­cien­cy, car­bon pro­file and op­por­tu­ni­ties for in­te­gra­tion

4. Lo­cal con­tent pro­jec­tion dur­ing con­struc­tion and op­er­a­tion of the plant

5. En­vi­ron­men­tal im­pact

6. Capex, opex and fi­nanc­ing re­quire­ments

7. Ex­tent of vari­a­tion re­quired on key con­tract terms for gas, util­i­ties and es­tate and port use.

8. Ad­di­tion­al ben­e­fits, in­clud­ing cor­po­rate so­cial re­spon­si­bil­i­ty(CSR)

Welch said the pro­posed am­mo­nia/urea plant meets those cri­te­ria and he was of the view that am­mo­nia has brought sig­nif­i­cant re­turns to the NGC and the gov­ern­ment of T&T, which is a good way for the coun­try's gas to be used. He ac­knowl­edged that the Gov­ern­ment want­ed to link the man­u­fac­tur­ing and en­er­gy sec­tors and said while this is good and ought to be pur­sued, one had to en­sure that the prod­uct was one that man­u­fac­tur­ers would go af­ter. Welch said: "Go­ing fur­ther down­stream is im­por­tant but you have to have man­u­fac­tur­ers tak­ing up the prod­uct and util­is­ing it. It makes no sense if you have the melamine there and the man­u­fac­tur­ers are not us­ing it." Welch said the coun­try had to be aware of the po­ten­tial threat that shale gas in the US and around the world pos­es to T&T. He said there is a be­lief that shale gas had in­creased the world's nat­ur­al gas re­serves by 40 per cent and with­in re­cent time nat­ur­al gas prices in the US were of­ten low­er than in T&T.

In those cir­cum­stances, he said, there was a need for the pro­duc­ers, gov­ern­ment and petro­chem­i­cal pro­duc­ers to get to­geth­er and chart a way for­ward. He ac­knowl­edged the ar­gu­ment that there was quick reser­voir de­ple­tion in the pro­duc­tion of shale gas, but said there was so much of it, there was sus­tain­abil­i­ty. Welch said the pro­posed am­mo­nia/urea plant would con­sume 95 mil­lion cu­bic feet of nat­ur­al gas per day , sim­i­lar to the amount of gas be­ing utilised by the pro­posed AUM II plant. He al­so sought to re­buff sug­ges­tions that PCS had a num­ber of old plants that were not ef­fi­cient. He said PCS fourth am­mo­nia plant was not just the most ef­fi­cient in T&T, but in the world. Welch said over the years, when­ev­er there was ex­pan­sion, PCS took the op­por­tu­ni­ty to up­grade its old­er plants and, in that re­spect, the old­er am­mo­nia plants were al­so ef­fi­cient. He said PCS re­mained op­ti­mistic that it will even­tu­al­ly get a trench of gas for its ex­pan­sion and ap­proval from Cab­i­net for the project.