The future of NiQuan’s gas-to-liquids (GTL) plant located on the compound of mothballed Petrotrin refinery at Pointe-a-Pierre is uncertain unless it can raise money—to the tune of hundreds of millions—to pay off its debts (the most urgent being for natural gas), and re-engage either the Trinidad and Tobago Upstream Downstream Company (TTUDEOCL) or the National Gas Company (NGC) for another contract.
The plant has no contract for natural gas, no permission to operate from the Ministry of Energy and Energy Industries (MEEI), and is now offline.
NiQuan’s creditors—local and international—are at the risk of losing hundreds of millions and jobs are on the line.
Last week, NiQuan’s chairman John Andrews leveraged his credibility and asked the Government to uphold the “sanctity of contract,” referring to the gas sales contract, which was terminated last month.
This week, the Sunday Guardian examines what unfolded over the past three years from public information available from investors, rating agencies, and court filings, including several letters in which the special purpose company set up to supply natural gas to NiQuan called on it to pay for gas supplied.
On paper, NiQuan was a neat prospect—an innovative plant producing clean fuel, the bulk of infrastructure already built out, and in a country where it can access natural gas to supply it.
In reality, it struggled with technical issues and cash flow constraints that impeded its ability to immediately address and erase operational challenges.
Its misfortunes were multiplied by the pandemic and two major incidents on its compound–an explosion in April 2021 and the June 15 accident which subsequently led to the death of a contractor, Allanlane Ramkissoon.
And what was once a key selling point to investors–a 15-year natural gas supply contract and a take-or-pay product offtake agreement with Paria Fuel Trading Company–has been scuttled.
But why and how did the startup stall? Essentially, NiQuan was financially hamstrung.
First, it was not well capitalised. NiQuan ran on capital it raised from bonds and to date, it has had five extensions from its bondholders which are due.
But it lacked cash flow and the ability to generate it–money to purchase new equipment to replace faulty ones and money to pay for bills incurred especially to the TTUDECOL for natural gas, where that debt is over US$21 million. The company was also subject to curtailment issues which has affected the downstream sector.
Furthermore, it was unable to meet its own deadlines set for a Lenders Reliability Test (LRT)—to demonstrate to the project financiers that the plant could operate for 72 hours uninterrupted and produce a capacity of 2,400 barrels a day–and an effective Commercial Operations Date (COD).
The LRT and the COD were critical to NiQuan.
The LRT would have allowed NiQuan to go back to its lenders to refinance its existing debt. On March 16, 2023 rating agency CariCRIS noted that if NiQuan was not able to achieve optimal production by June 30, 2023, it would affect its ability to refinance the existing notes or obtain approval for a further extension by noteholders by July 31, 2023.
It noted that the inability to achieve certification of the full nameplate capacity of 2,400 barrels per day “adversely impacted the company’s ability to secure timely refinancing.”
As for the COD, Clause 2.7 of NiQuan’s contract with TTUDECOL noted that if the COD was not attained six months after NiQuan advised, the company still had to pay TTUDEOCL for 90 per cent of the Daily Contracted Quantity.
In a statement by Andrews, the chairman of NiQuan, last week, the company said it did not breach its financial commitments to the TTUDEOCL.
“NiQuan is not in breach of its financial contractual obligations with its gas supplier. The NiQuan contract stipulates that payments are not due to its supplier until the plant achieves the Commercial Operations Date. Factually, NiQuan made numerous attempts to arrive at an amicable resolution, but were eventually constrained to seek remedies, some of which are currently before the courts and therefore beyond further comment,” the statement said.
NiQuan’s legal battle with the State was premised on the sanctity of a contract.
When it filed its appeal of the judgment in its attempt to get an injunction compelling the resumption of natural gas supplies, NiQuan told the Sunday Guardian that, “NiQuan’s account with Trinidad and Tobago Upstream Downstream Energy Operations Company Limited (“UD”) was fully paid up to the April 6, 2023. All other amounts claimed by UD are either not due and payable or otherwise in dispute.”
Neither NiQuan nor TTUDECOL stated how much was paid in April.
Timeline to termination
A review of documents shows that NiQuan has broken commitments to its project and has been habitually delinquent in repaying sums owed to TTUDEOCL for natural gas delivered to it.
* On September 5, 2019, NiQuan advised TTUDEOCL that its reasonable estimate of the pre-start-up date was April 27, 2020, its initial delivery date was July 30, 2020, with its COD at August 30, 2020.
* By February 2021, it said that once full nameplate production had been reached and stabilised, it would conduct the LRT after which commercial operations would be declared.
“As we had informed you, that would trigger the onset of our ability to treat with the invoicing matters you had raised,” a letter from its founder and chief visionary officer Ainsley Gill had said.
Based on publicly filed court documents, here is now the interchange between NiQuan’s Gill and TTUDEOCL’s former chairman Richard Jeremie unfolded:
* On April 14, 2021, TTUDEOCL made NiQuan aware that despite the April 7, 2021 accident that occurred at the plant, it was financially obligated to meet its bills;
* On April 29, 2021, NiQuan proposed a payment plan to TTUDEOCL which it accepted;
* On May 24, 2021, TTUDEOCL wrote to NiQuan explaining that its “fervent efforts” to secure the 3MMscf/d of gas from State-owned National Gas Company (NGC) were “rendered feeble and ineffective” because it has been unable to pay our supplier (NGC) for the gas that was supplied from July 2020 through March 2021;
* On May 25, 2021, NiQuan assured that it would pay, but indicated it was experiencing temporary cash flow constraints. NiQuan noted that it was raising financing from JMMB who received “ irrevocable instructions to make that payment direct to TTUDEOCL from the proceeds of the financing expected”. At this time, NiQuan noted that it would not require gas until July 2021 for the purpose of re-starting the commissioning and ramping up the Plant to attain LRT and full commercial production in August 2021;
* On July 1, 2021, TTUDEOCL wrote to NiQuan on non-payment of invoices. “Given NiQuan’s position and our subsequent negotiations where you provided a firm commitment to make payments by June 30, 2021, TTUDEOCL requested and received an extension of time to make payments to the NGC on or before June 30, 2021. TTUDEOCL specifically advised you that in the context of a prolonged non-payment of invoices, NGC was considering all options available to it including termination of the contract,” Jeremie wrote. At that point, TTUDEOCL issued a notice of dispute to NiQuan.
* On July 15, 2021, NiQuan wrote to TTUDEOCL that it received approval from Republic Bank Ltd and all of the noteholders invested under its current senior secured short-term note instrument (the “Bridge Facility”), to upsize the principal amount and to extend the repayment date to March 31, 2022.
Gill noted that investors were categorically only prepared to disburse funds for the specific purpose–the cost of repairs to the blown-out Hydrocracker Stripper Column and to implement all other plant turnaround and safety features to attain LRT and COD.
As such, Gill requested a moratorium until the attainment of LRT and COD in a few months’ time. “However, we would reiterate that the moratorium is required urgently because unless we have it, funding will not be provided for the completion of the repairs, turnaround, commissioning, and attainment of LRT and COD. Delays in funds, of course, have a direct impact on the schedule for attaining LRT and COD, and ultimately the ability of NiQuan to meet its payment obligations to TTUDEOCL and NiQuan’s many other vendors and contractors,” he said;
* On July 22, 2021, Jeremie wrote to Gill explaining that TTUDEOCL was “perplexed” by NiQuan’s letter “in which there seems to be a casual revocation by NiQuan to meet its commitment to pay TTUDEOCL for the gas supplied during the last twelve (12) months”.
“It is not the intention of the Gas Sales Contract that NiQuan (the Buyer) can take an unfettered number of years to achieve commercial operations of the GTL plant without making any payments for the gas received,” said Jeremie. He said that TTUDEOCL is unable to agree to a moratorium;
* On August 12, 2021, TTUDEOCL wrote again to NiQuan seeking payment. “We are certain that you would appreciate that there is a limit to the accommodation that TTUDEOCL can continue to offer to NiQuan at this time, as we have a responsibility to act in the best interest of our company, and of our shareholder, the Government of the Republic of Trinidad and Tobago,” it said.
* On August 23, 2021, NiQuan said that it would make payments due on September 30 and October 30, 2021, respectively. At that time Gill advised that COD was now the end of October 2021;
* On October 2, 2021, NiQuan said COD was pushed back to December 15, 2021;
* On December 1, 2021, TTUDEOCL noted that payments were due and allowances were made for the delay. “Failure by NiQuan to make the second and third payments in full as agreed is a breach of our Letter Agreement,” it said.
* On March 7, 2022, NiQuan noted that the LRT and COD would occur by the end of April 2022 and would generate money for the company;
* On May 25, 2022, natural gas returned to the plant;
* On August 17, 2022, TTUDEOCL wrote to NiQuan and gave notice of a force majeure event which, "as we have been advised by our suppliers, is the falling of network pressures resulting in shortages in gas supply;"
* On August 18, 2022, TTUDEOCL sent a notice of late payment to NiQuan. “From a commercial perspective, there is a limit to the clemency for NiQuan that can be accommodated by TTU DEOCL, as this company must satisfy its own financial obligations to its suppliers,” it said;
* By August 19, 2022, NiQuan said its attention and resources are focused on attaining LRT and COD by the end of August 2022;
*On September 2, 2022, TTUDEOCL told NiQuan that arrangements are being made to facilitate it with the requisite volumes of gas to attain its LRT and COD starting from September 1 2, 2022;
* On October 10, 2022, NiQuan noted that it was late on its payments but that curtailment was affecting the plant;
* On October 1 8, 2022, TTUDEOCL again called on NiQuan to pay its bills. “TTUDEOCL is unfairly being asked to await the LRT and achievement of the COD for payment when such a position was not taken in negotiating the terms of the Letter Agreement,” it said;
* On November 23, 2022, TTUDEOCL informed NiQuan that its request for gas to perform LRT while taking gas below the required 27.4mmscf/d was becoming disruptive to the NGC operations to supply gas to its customers.
“Further, the NGC Control room has requested that the daily gas requirement be made at least 24 hours in advance. This has not been followed by NiQuan in the last weeks. TTUDEOCL is hereby requesting that NiQuan provide gas information as requested. In addition, an update on the start of the LRT is urgently needed. As pointed out in my last email to you, continued delays in the performance of the LRT and non-payment of outstanding monies owed may result in TTUDEOCL gas supplier taking action,” Jeremie said;
* On December 7, 2022, NiQuan said the LRT would be completed on December 19, 2022, and requested a grace period to pay bills due;
* On January 6, 2023, TTUDEOCL told NiQuan that NGC cannot make any commitments at this time as they are currently under curtailment. “As you are aware, TTUDEOCL/NGC have made best efforts to facilitate NiQuan’s LRT in the past and it has not happened,” Jeremie said;
* On January 16, 2023, NiQuan paid US$1,100,000 to TTUDEOCL. “At current we are only receiving 5 mmscf/d, and as a consequence, this continues to impact attainment of LRT and sustained production hence our commercial viability is at serious risk. We really need TTUDEOCL to source the requisite amount of gas 24.7 mmscf/d, hopefully today so that we can immediately go back into production, achieve LRT and COD,” Gill said.
* On February 13, 2023, NiQuan achieved LRT but at reduced production rates (45 per cent of the nameplate capacity).
“We are expecting to increase the production rates to around 70 per cent in the next three weeks and maintain that production until we receive and install four new specialist membranes to the Plant’s Prism Section, which are in order from the USA and expected in July 2023, at such time we will be able to attain 100 per cent of the nameplate and the COD,” Gill said.
* On June 15, 2023, an accident occurred at NiQuan’s plant which subsequently led to the death of a contractor at the plant.
* On July 10, 2023, eight invoices totalling US$14,727,137.45 for gas supplied to NiQuan under the subject Contract (“the Contract”) for the period May to December 2022 were issued to NiQuan on April 5, 2023, and three invoices totalling US$4,470,687.10 for gas supplied to NiQuan under the subject Contract for the period January 2023 to March 2023 were issued to NiQuan on May 11, 2023. Notices of Late Payment were issued to Niquan on May 19, 2023, and June 1, 2023. The company was informed that if payment was not made in 30 days, the contract would be terminated.
* On August 7, 2023, NiQuan made a request for a commercial supply of gas from TTUDEOCL with a commencement date of August 8, 2023.
* On August 14, 2023, TTUDEOCL terminated the contract with NiQuan.” NiQuan has materially breached the Contract and has failed to remedy that breach within thirty (30) days of our 10th July 2023 notice. In these circumstances, please be advised that pursuant to Article 13.1 (b) of the Contract, we hereby terminate the Contract with immediate effect,” the company said.
* On August 15, NiQuan sought injunctive relief in the courts.
* On August 21, Justice Kevin Ramcharan denied NiQuan an injunction to compel the State to supply natural gas to the plant. NiQuan has since appealed the matter.