Mariano Browne
The governance structure of the Catholic Church is hierarchical and autocratic. But the Pope is deemed to be infallible only when he speaks ex-cathedra on doctrinal matters. Cabinet is similarly structured, limited only by the Constitution which it also has the power to change by special majority in Parliament.
Exercising that power properly in managing the considerable economic assets of the State can improve T&T’s economic well-being by billions of dollars. This requires knowledge, judgment, capacity, and skill to address current challenges for which the past provides few guidelines and the operational mechanisms are weak. The Clico debacle is one such example; Petrotrin is another.
Decisions are always made with limited information. One can only tell if a decision is correct in the fullness of time. But the road to hell is paved with good intentions. Therefore, we must devise measurement systems to determine if the outcomes have been beneficial and to inform the corrective action to be taken when they are not. In this regard, the current methodology employed is weak or non-functional.
In January 2017 the Prime Minister gave every reason to justify the Petrotrin Board’s decision to give no wage increases but proceeded to announce a five-per-cent increase. In 2018, having changed the Board, he used the same information, with embellishments and emotive rhetoric, to justify the refinery’s closure, the company’s dismemberment, staff retrenchment. He also said that the company would not be sold to foreign interests.
Petrotrin Chairman Wilfred Espinet testified before the Industrial Court that he told the Government officials that the refinery was not likely to be profitable in a meeting in January 2018 but never advised the Government to close Petrotrin. The Prime Minister has confirmed that Cabinet decided the current course of action.
According to Communications Minister Stuart Young Petrotrin is being restructured, not closed. It will continue as a company in a new umbrella holding company ownership structure which would be created by a series of parliamentary vesting orders. The company's legacy issues (meaning what?) are to be transferred to a new holding company, Trinidad Petroleum Holding Ltd, while Petrotrin will remain as an entity in the group of subsidiaries owned by the Trinidad Holding Company Ltd.
Trinidad Holding Company's four subsidiaries are to be the Heritage Petroleum Company Ltd, Paria Fuel Trading Company Ltd, Guaracara Refining Company Ltd, and Petrotrin.
Heritage Petroleum will oversee exploration and production, with revenue generated through crude sales and crude storage, Young said. Paria Fuel Trading will oversee terminalling, fuel trading, product supply, and logistics. It is to be located at Pointe-a-Pierre. Guaracara Refining will oversee the preservation of refinery assets that are being mothballed, while the refinery (Petrotrin?) will provide 'utility services' to Paria Fuel Trading.
'The devil is always in the details'
Mr Young also said that Requests for Proposals will be addressed to 'the world at large' when the Petrotrin refinery goes on sale, following the vesting of the company's assets.
The devil is always in the details. First, these actions are a breach of the loan covenants (domestic and foreign) and normally would have caused bondholders to sue to recover the outstanding debts immediately, excluding Government from the process. Since this has not happened, it can only mean that the Government has either given guarantees to all bondholders or assumed the company’s secured debt obligations, bullet payment and all. Either way, it increases the country’s debt to GDP ratio with significant negative implications. What is the current position and how does it affect the Government’s debt service obligations?
Second, since these new companies have no track record, financing daily business transactions like importing refined products must be financed with new credit arrangements. On October 8, Minister Imbert had warned that Petrotrin “will implode and collapse within the next month” if it did not secure a government guarantee of $1.2 billion on or before October 15. Therefore, the transitional business arrangements also require government guarantees.
Third, arrangements must be made with current creditors to pay existing obligations to avoid bankruptcy petitions as used by the Finance Minister against CLF.
Fourth, how are the entities to be financed? How does the recently formed Upstream Downstream company fit in this new arrangement and what is the arrangement with Niquan Ltd?
Fifth, non-nationals are being recruited at considerable expense. What will change in the management of these companies to ensure that the companies are properly tasked and operated? How will this be extended to other state enterprises? How will the remuneration of other executives be approached? And what of the other staffing arrangements? How do we retain local talent and skill?
Sixth, there are considerable land assets conveniently classed as legacy issues. How they are dealt with raises significant policy issues of land and wealth distribution.
There have been restructurings before; a coat of paint will not work. NHA was restructured into the HDC; TTT into CNMG and back to TTT; IDC into TIDCO and ETeck; TIDCO into TDC et al; Trintoc and Trintopec into Petrotrin; none successful. What will be different this time and what of the other state enterprises? How will the leadership, accountability, management and productivity issues be addressed meaningfully to achieve successful outcomes?