Last Wednesday, I read with interest the details of a "Cabinet Note" published by the Business Express which reveals that Government expects to offer shares of Phoenix Park Gas Processors Ltd (PPGPL) to the market by July 21.The IPO will be via a subsidiary company of the National Gas Company (NGC) called Trinidad and Tobago NGL Ltd. TTNGL will have two classes of shares–Class A, held by NGC of 38,700,000 and Class B shares being 116,100,000 of which 75,852,000 would be offered to the public.
Firstly, if the note is bona fide, this suggests that the TTSEC investigation into the now infamous First Citizens IPO has been completed and it's only a matter of time before the contents of their report starts seeping into the public domain. Since without the public being told the facts about what transpired in the FCB IPO, I cannot see anyone having much confidence in the PPGL IPO going forward.
According to the note, Corporation Sole proposes that employees and retirees of NGC and its subsidiaries or affiliates and individuals who are nationals of T&T would receive a "combined allocation" of 60 per cent of the IPO or 45,511,200 shares. While the other 40 per cent or 30,340,000 shares would be allocated to corporate T&T inclusive of companies, pension plans, mutual funds, credit Unions and cooperatives, Unit Trust Corporation, National Insurance Board, National Enterprises Limited etc.
Each employee or retiree of NGC and its subsidiaries or affiliates would be given the right to buy a specified allocation of up to 5,000 shares and these shares will be subject to a discount of 10 per cent of the offer price of $25.00; any amount of shares purchased in excess of 5,000 shall be at the offer price and those market-based purchases would compete with all purchases by the citizens of T&T.
On the face of it Finance Minister Larry Howai seems to have learnt some important albeit expensive lessons from the FCB experience in terms of the allocation formula.However, by introducing a new category called "retiree" which not only did not exist in the FCB IPO but is unprecedented in T&T's IPO history, the implications of this change are far reaching. Since, it is virtually impossible to know how many retirees of "NGC, its subsidiaries and affiliates" presently exist.
However, it's safe to surmise that it would be significant and that most if not all of them are likely to apply for shares in the IPO, particularly since the minister is proposing to give them the right to buy up to 5,000 shares at a 10 per cent discount. What this means is that the number of shares that would be available to the public is going to be significantly reduced, not to mention the revenue that the treasury will have to forego.
In other words, what the minister has proposed is to eliminate the "employee and retiree bucket" by combining it with the "individuals bucket," and after up to the first 5,000 shares are allotted to employees and retirees, they can then compete with individuals for balance of shares of up to 60 per cent of the IPO on a level playing field.The problem is because the number of retirees is an unknown variable, there is likely to be an outcome that is disadvantageous to individuals.
The truth be told the reason why employees are given incentives to buy shares in their company (usually via an ESOP plan) is because the research has shown that being a part owner usually leads to increased productivity and profitability. I don't know that the same rationale can apply in the case of retirees.Accordingly, I am calling on the Finance Minister to revisit this change, because as the old adage goes, "the road to hell is usually paved with good intentions."
Peter Permell
Minority shareholder
rights advocate