?State-owned National Gas Company will lower the price of the shares to be sold to the public in the Initial Public Offering (IPO) of Phoenix Park Gas Processors, NGC president Indar Maharaj said in an interview on Thursday last.
Speaking at NGC's corporate box at the Queen's Park Oval, Port-of-Spain, the company's chief executive said the natural gas distribution company was in "the very, very final stages of submitting the prospectus for the IPO to the Securities and Exchange Commission (SEC) for their review and comments."
He estimated that NGC could launch the IPO "within at most eight weeks," and that it could be less depending on how quickly the SEC reviewed the final submitted draft.
On Monday, RBC-owned stockbrokers, WISE, said that it had been informed by the lead broker, First Citizens Investment Services, that the estimated launch date of the upcoming TTNGL IPO (Phoenix Park) should be between June 22, to June 29, 2015.
NGC purchased an additional 39 per cent stake in Phoenix Park for US$600 million ($3.84 billion) from US oil giant ConocoPhillips in September, 2013. Those shares are being held by an NGC subsidiary named TTNGL and it is in that company that NGC proposes to sell a 49 per cent stake.
In effect, this means that the participants in the IPO will collectively own 19.11 per cent of Phoenix Park. (See box)
The money from the Phoenix Park IPO will go to fund the shortfall between Government's revenues and its expenditure, Prime Minister Kamla Persad-Bissessar announced in an address to the nation on January 8.
Asked what NGC had decided with regard to the price of the shares to be offered to the public, Maharaj said: "Of course, I cannot disclose numbers, but we have done another evaluation and we have had to do some amount of impairment in that valuation. As a result, we have relooked the pricing of the shares and we have made some adjustments to that.
"When we do the IPO, the pricing will be different to what you saw last year."
On May 28 last year, the Express published an article which quoted a Cabinet Note stating that NGC proposed to issue 75,852,000 TTNGL shares at $25 each, which would have raised $1.896 billion. That's almost exactly 49 per cent of the US$600 million that NGC paid for the shares. That meant that a year ago, NGC proposed to sell the shares to the public at almost exactly the same price that it paid for them.
But that was before the collapse, at the end of November, of global oil prices and the prices of Phoenix Park's products, which are propane, butane and natural gasoline.
Asked what he meant by impairment, the NGC president said: "Impairment of the value. We did a valuation when we purchased the shares in 2013.
"One year ago, when we were getting ready to do the IPO, we would have also done a valuation.
"Because of what happened in the marketplace in the last few months, we have had to do another valuation. The falling energy prices would have had an impact on the prices and the valuation of Phoenix Park and the offering price had to be addressed."
Questioned whether the value of the shares to be sold at the IPO would be less than or equal to the price NGC paid for the shares from ConocoPhillips, Maharaj said: "It would be less."
The decision to adjust downward the price of the TTNGL shares to be offered to the public represents an apparent change in the position of NGC with regard to Phoenix Park's falling product prices and their impact on the IPO share price.
In a column, in this space, headlined "Will lower product prices affect Phoenix Park IPO?" Maharaj had stated by email: "At this time, I cannot give any details of the pending IPO for obvious reasons. However, we do not expect to do the issue at a price lower than what we paid for the asset.
"The valuation is based on a 15-year forecast in which it was anticipated there will be some amount of volatility and cyclical market behaviour.
"We did not use 'moment in time' prices. These market behaviours would have been built into our valuation model.
"I must say that we were very conservative in forecasting the product prices.
"Therefore, I do not see any significant impact on the valuation, at this time."
Questioned about the average decline in the prices of Phoenix Park products over the last year, NGC's vice president of Finance and Information Management Anand Ragbir said: "On average, Mont Belvieu prices for propane, butane and natural gasoline have declined by between 25 and 40 per cent.
"What I hasten to add is that those are the Mont Belvieu prices. Phoenix Park has adopted a new approach to marketing their products, which relates to going out for open tenders and that has added some upside to the value that they receive.
"Some of the upside from the fall in Mont Belvieu prices has been eliminated by this new approach to marketing."
Maharaj added that previously Phoenix Park entered into long-term, single source contracts for the sale of its products.
He said that once Phoenix Park's product prices recover, "then naturally the value of the asset will increase and the value of the shares will increase. All the expectation in the short of medium term is that prices will recover. Once that happens, the stock price and everything else will follow."
In addition to the marketing adjustments that Phoenix Park has made, the petrochemical executive said, "We are also looking at what options we have for further optimising the business from both commercial and technical perspectives."
In November, 2014, Eugene Tiah left his job as president of Phoenix Park, which he had held for 13 years, to join the Massy Group as the chairman of its energy and industrial gases business unit.
Of Tiah's sudden departure, Maharaj said: "From what the gentleman has said, he has been given other opportunities that appear, probably, more attractive to him. As you know, Massy is looking at extending outside of T&T. There is also a larger portfolio of things they are looking at, including DME project in La Brea."
The NGC president said the transfer of executive power had been seemless because Phoenix Park facility is a "mature" one, but well organised and well operated.
Responding to a question about state enterprises and the possibility of political directives that may not have the best commercial interests of the company, Maharaj said: "Before coming to the NGC, I spent 30 years of my career in the private sector.
"Wherever you are the issue is not one of ownership but of management and management will always have challenges in terms of how you address ownership, while ensuring the long-term good of the business.
"It is important that we address the owners or directors purely on a business basis and not get involved in other issues."
NGC NGL–owns 51 per cent
T&TNGL–owns 39 per cent
Pan West–10 per cent
NGC owns 80 per cent of NGC NGL, National Enterprises Ltd (NEL) owns 20 per cent
NGC owns 100 per cent of T&TNGL; proposes to sell 49 per cent in an IPO in June.
NEL, Unit Trust Corporation and the National Insurance Board each own 3.33 per cent of Pan West.
�2Phoenix Park's shareholders are:
NGC NGL–owns 51 per cent
T&TNGL–owns 39 per cent
Pan West–10 per cent
NGC owns 80 per cent of NGC NGL, National Enterprises Ltd (NEL) owns 20 per cent
NGC owns 100 per cent of T&TNGL; proposes to sell 49 per cent in an IPO in June.
NEL, Unit Trust Corporation and the National Insurance Board each own 3.33 per cent of Pan West.