The decision to sell the National Petroleum Company’s 81 Company-Owned Dealer Operated (CODO) gas stations comes after years of the company haemorrhaging from the cost of up keeping those gas stations.
This according to NP chief executive officer, John Gormandy.
He was speaking on CNC3’s the Morning Brew on Thursday. Gormandy said the company provides monthly, quarterly and yearly financial statements to the Government, which would have predicated this decision.
“They would have seen that the company would have experienced some decline in sales especially on the retail side where we started to haemorrhage, it’s a really heavy capital investment area and based on the downward trend of the fuel sales, consumers are now opting to move to more fuel efficient forms of transportation mainly the hybrid and the CNG and we’ve seen a downward trend in the fuel sales,” Gormandy said.
He said the cost to maintain the 81 CODO gas stations was between $25 to $35 million a year and the switch to more fuel efficient vehicles led to a three to four per cent decline in NP’s revenue.
Gormandy said there was nothing the company’s management could have done to prevent its financial hardship in a regulated pricing fuel market.
“We have been operating in a controlled environment, the pricing system is regulated, the room for growth is limited, we have x amount of vehicles on the road, there are two wholesalers competing and NP also has a social responsibility, our mandate is slightly different from our competitor, we have to service areas that our competitor doesn’t, more rural areas and even Tobago.”
He said the service to Tobago was not profitable, given the high transportation cost to get fuel to the island.
But Gormandy also laid blame on NP’s employees for the company’s financial woes.
He said the Oilfield Workers Trade Union (OWTU) pushed for salary increases for the workers despite being presented with financial records showing the company was struggling.
“Last year we would have had the settling of the 2011 to 2013 period where in the court, the case went to having to pay an extra seven per cent in wages and we had to consolidate COLA which resulted in another 25 to 30 per cent so on average, our wages would have gone up between 25 to 30 per cent and that too contributed to the unsustainable position we had so the retail side began to see the company operating in the red,” Gormandy said.
Gormandy said he had hoped that when the OWTU was presented with the financials “some sort of logic” would be applied but that was not the case.
He said credit had to be given to NP’s management, who recognised the need to make a change before the COVID-19 pandemic and started a restructuring exercise in April.
Gormandy said the company’s three other revenue streams- lubricants, LPG, marine and aviation fuel supply were profitable and he hopes once the retail sector is no longer a burden, NP will recover.
However, he could not say when the gas stations will be sold.
“We still haven’t gotten the finer details from the Ministry, we were told the deregulation will take place in January 2021, I expect between now and then we will get clearer directives on how the sale of the assets will take place I am estimating this process will take probably close to two years to complete,” Gormandy said.
He said the company hopes the jobs of employees will not be impacted but he did not rule out job losses.
“We still have to service these gas stations, we are looking to enter into supply contracts with them, the details of that has to be hashed out when we get clarity on how the sale will operate- so it may not necessarily mean that we have to displace workers but if that has to happen, we are already starting to think along the line of offering services to these dealers, in the form of maintenance, IT, customer service, there are areas that may now open up for us to earn revenue.”
He said to give a definitive answer now would only be speculation.