After more than three years and four months of deliberation, the arbitration tribunal sitting on the valuation of Point Lisas-based Methanol Holdings (Trinidad) Ltd (MHTL) has decided that Clico's 56.53 per cent stake in the methanol company is worth US$1.175 billion (TT$7.40 billion).
The decision of the three-member tribunal of the ICC International Court of Arbitration, which was handed down on Thursday, valued MHTL at US$1.4 billion, but then applied a 19.1 per cent liquidity discount to get to US$1.175 billion, Government sources told the T&T Guardian yesterday. A liquidity discount is the lower valuation applied to shares that are illiquid, or cannot be sold easily or quickly.
The valuation placed on MHTL by the tribunal was immediately described by Government officials as being "substantially below the true market value."The Government had submitted valuations from three international investment banks that indicated MHTL was worth between US$1.6 billion ($10 billion) and US$2.2 billion ($13.9 billion).
The Government had been counting on a favourable decision of the arbitration tribunal as it sought to recover about $20 billion it pumped into the CL Financial empire in 2009 and 2010.On January 30, 2009, the then Minister of Finance Karen Nunez-Tesheira signed a Memorandum of Understanding with former executive chairman of CL Financial, Lawrence Duprey, outlining the terms of the then government's intervention to save Clico, Clico Investment Bank and British American Insurance.
As a result of the intervention, Clico was put under the control of the Central Bank, under the institution's special powers to act if the financial system is threatened.Before the intervention, 49 per cent of MHTL was owned by Clico, 7.53 per cent by the insurer's parent company, CL Financial, and 43.47 per cent by a group called Consolidated Energy Ltd, comprising German companies, Ferrostaal, Proman and Helm.
Shortly after the intervention, the 7.53 per cent held by CL Financial, along with a similar percentage held by Methanol Holdings (International) Ltd, the Oman-based methanol producer, were transferred to Clico to discharge a $1.1 billion debenture that the insurance company held over its parent.That transaction immediately caused friction with the minority shareholders, as it led to Clico becoming the majority shareholder in its own right.
The German minority shareholders were disturbed by the fact that Government acquired a 49 per cent stake in Clico, in exchange for $4.9 billion worth of preference shares, and that the Government/Central Bank were in control of the insurance company's board.
In May 2011, Consolidated Energy Ltd triggered a clause in the shareholders' agreement that established MHTL, claiming that the actions of 49 per cent Government-owned Clico and CL Financial–which was then controlled by the Government–were oppressing them, the minority shareholders.
In March 2013, the tribunal upheld the oppression claims of the minority shareholders and in November 18, 2013, the tribunal concluded the suitable remedy for this oppression was the sale of the 56.53 per cent shareholding by Clico in MHTL to the claimants within a reasonable time.As outlined in Clico's 2012 financial statement, the tribunal then gave MHTL's majority and minority shareholders until the end of January 31, 2014 to negotiate and agree the terms of sale.
If no agreement was reached, according to the tribunal, it reserved the right at that time to set the price for the sale, following further submissions by the parties, based on updated market valuations as at January 31, 2014.The final price that the tribunal came up with was US$1.175 billion.The decision of the arbitration panel is final as both sides agreed to be bound by it.
Clico has 14 days from the date of the decision to transfer the shares to Consolidated Energy Ltd, sources told the Guardian.
Howai must make statement
In a statement yesterday, the Clico Policyholders Group said the decision of arbitration tribunal means "the train has now officially left the station with regard to sale of this 'national treasure' to its Germany-based minority owners.
In this regard, it is important to note that MHTL is one of the largest methanol producers in the world, with a production capacity of more than 4 million metric tonnes annually. It is also the largest supplier of methanol to North America having supplied circa 66 per cent of total US methanol imports in 2013.
The CPG is therefore deeply concerned by this development and is calling on the honourable Finance Minister Larry Howai to immediately issue a comprehensive statement on this matter, including its implications for all stakeholders and the country going forward.