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Tension at Petrotrin

...Plants offline, workers being paid for ‘idleness’
Sunday, February 23, 2014


State-owned Petrotrin is facing another financial challenge, as there are reports that 21 of 23 plants within the aging refinery have been shut down, a pending multi-million dollar security bond payment is due and there remain unpaid bills piling up from the two-month old oil spill. 


While Petrotrin has remained mum on the shutting down of the plants, workers at the company have reported to their representing union, the Oilfields Workers’ Trade Union (OWTU), that the sub-plants have been “offline for several days”. 


This, workers said, will invariably lead to more financial losses for the already cash-strapped organisation. 


OWTU boss Ancel Roget has questioned why the company was keeping news of this shut down quiet. In a telephone interview on the issue, Roget said if the workers had been behind the shut down “it would be all over the news.”


“But it’s shut down now because of poor management and we are hearing nothing,” Roget said.


“There is no feed stock to keep the machinery going and the workers have nothing to do with that. That is strictly as a result of poor management and poor decisions at that State feeding trough called Petrotrin.” 


Minister of Energy Kevin Ramnarine did not return phone calls and did not respond to e-mails on the situation. Petrotrin chairman Lindsey Gillette, president Khalid Hassanali and communications manager Gillian Friday have not answered repeated calls, texts and e-mails regarding the shut down, but one source close to the executive has confirmed that the plants have been off-line due to a lack of raw material feed stock to supply the refinery.


In fact, the Sunday Guardian was told that senior management mandated that “no one speak to the Sunday Guardian” when they learned the matter was being investigated.


In the past year, Petrotrin has faced numerous money-losing situations, triggered by workers’ action, by the December 17 oil spill and by infrastructural issues within the refinery.

US$150m bond payment due


This latest setback could affect the company’s ability to furnish its massive US$150 million in secured bonds insurance payment which becomes due this year. The bond, which was underwritten by MBIA Insurance Corp back in 2001, holds the company assets as collateral. 


The Sunday Guardian acquired a document from US rating firm Standard and Poor which shows that payment on a financial guaranty insurance policy issued by international insurers—MBIA Insurance Corp—is due this year. 


Though the bond issue was given a favourable triple A rating, it is dependent on Petrotrin’s ability to ensure “timely payment of interest and principal,” the Sunday Guardian learned.


According to the Standard and Poor assessment, the underlying risk to MBIA is based on Petrotrin’s ability to “produce and export a sufficient amount of diesel fuel/No 2 Oil (No 2 Oil) to generate a sufficient amount of receivables to pay debt service.”


“The structural enhancements in place to mitigate sovereign risk, including the assignment of receivables to Caribbean Heating Oil Purchase Co Ltd and the requirement that, under the terms of the No 2 Oil contract, Petrotrin, acting as agent for the issuer, will resell the quarterly delivery requirement of No 2 Oil sold to the issuer to certain long-standing customers of Petrotrin. 


“In addition, each approved buyer will receive irrevocable instructions from Petrotrin notifying the buyer of the forward sale contract and instructing each buyer to make all payments into the offshore account,” the document read.


But MBIA is allowed to control the sale of Petrotrin’s products to ensure its payment is protected. The documents provide disincentives to “non-approved buyers.”


“Since it would require the company to redirect all products sold to the approved buyers, Petrotrin is the dominant seller in the regional market with a 74 per cent market share in 2000/2001 based on its ability to provide multi product cargoes to its customers,” the document said.


Roget admitted that with all the financial setbacks at Petrotrin in the past year, he was concerned about the company’s ability to finance its massive bond debt. 


In response to e-mailed questions, managing director, head of investor relations at MBIA Inc, Gregory R Diamond, would only say that he could not comment.


“As the insurer of bonds, we are generally not permitted to share information about the issuers of those bonds,” Diamond said.


Questions regarding the loan repayment were submitted to both Friday and Petrotrin corporate events co-ordinator Joy Antoine, but to date they have not been answered.

Other loan parameters:


According to the Standard and Poors document, there are several other parameters surrounding the bonds, which include:


n The loan also expects a “sufficient level of overcollateralisation”, which, on average, is expected to be over five times the debt service, given a 15-year average No 2 Oil price and over two and a half times the debt service given a 15-year minimum price level for a No 2 Oil stress case.


n The availability of a liquidity facility to cover debt service for the next two quarterly payments.


n The sale of product to high creditworthy borrowers, reducing the risk of losses resulting from a default by an approved buyer. Petrotrin is obligated to maintain at least three approved buyers, each of which must be rated at least triple-’B’-plus or a wholly owned subsidiary of a parent that is rated at least single-’A’-plus.


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