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Turnaround possible for Petrotrin
Congress of the People (COP) political leader Carolyn Seepersad-Bachan claims documents at Petrotrin show the company can be turned around. In her address at a Movement for Social Justice (MSJ) breakfast forum on Petrotrin at the Cara Suites Hotel and Conference Centre, Claxton Bay, yesterday, Seepersad-Bachan said there are several non-cash adjustments and one-off payments that could address losses at the Pointe-a-Pierre refinery.
On August 28, Government announced that it was ending Petrotrin’s refining and marketing operations following $8 billion in losses over a five-year period. The state owned energy company has a $12 billion debt and owes the government more than $3 billion in taxes and royalties. Petrotrin chairman Wilfred Espinet said the company requires a cash injection of $25 billion to refresh its infrastructure and repay its debt.
However, Seepersad-Bachan, an engineer and a former energy minister, referred to a March 5 internal memo which showed a $2 billion loss that was recorded in Petrotrin’s 2017 audited financial statement.
“It is not a negative cash-flow. It has to deal with all the significant non-cash adjustments: dealing with impairments of assets, expense in capital borrowing, non-recognition of deferred income tax and reduction in investor carrying cash. These are non-cash adjustments, in some cases, they are one-off,” she said.
“If you look at the cash flows themselves, you have $1.5 billion for earnings before interest, depreciation tax and amortization. You have a cash-flow that is $2.5 billion. That is in the accounts and that is what is explained here in this circular by Petrotrin on March 5, 2018.”
Seepersad-Bachan said in 2010, Petrotrin discussed establishment of a sinking fund in which 50 per cent of revenues earned from the new plants built using that money would cover the bullet payment. The US$750 million loan due in 2020 was an amortized loan, with only US$250 million outstanding, she added.
She told the audience of trade unionists, petroleum dealers and business representatives that while refinery margins were said to be low, as of July 2018, the margin was between US$8 to US$10 barrels per day (bpd). By her calculations, if operating expenses of US$4.50 bpd and US$1 bpd for overheads were subtracted, Petrotrin would show a positive cash flow of US$2.50 bpd of refined products.
Seepersad-Bachan recalled that the refinery underwent upgrades in the 1970s, 1990s and 2010s and the state of the art equipment installed cost between $4 billion to $6 billion.
She said the best market for T&T’s crude is the Pointe-a-Pierre refinery, due to pricing issues and the limited availability of naphthalic-type refineries for heavy crudes. She said while there is a possibility that prices might decrease in the coming years, low crude price will benefit the refinery.
Seepersad-Bachan referenced Moody’s vice-president and senior analyst Arvinder Saluja who predicted that refining and marketing companies’ earnings will increase by 13-15 per cent through the end of 2019.
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