Home' Trinidad and Tobago Guardian : September 14th 2014 Contents SEPTEMBER 14 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
NEWS | SBG3
On Thursday, the 150-page
decision of the tribunal
established by ICC Interna-
tional Court of Arbitration
to look into the complaint
brought by the minority
shareholders of Methanol Holdings (Trinidad)
Ltd (MHTL) was received in T&T.
The tribunal, which took more than three
years to complete its work, placed a value of
US$1.175 million on MHTL, a company that
was established 15 years ago, following the
amalgamation of several methanol companies
that were owned by CL Financial and its Ger-
1) How does the award affect the
resolution of the CL Financial matter?
The Government was expecting an award
in the region of US$1.8 billion ($11.4 billion),
officials close to the process told the Business
Guardian earlier this year.
With $11.4 billion from the sale of MHTL,
the Government could have recovered a sig-
nificant percentage of the money owed to tax-
payers without too much heavy lifting.
That might have involved only the sale of
Clico s traditional portfolio of insurance assets,
along with the disposal of the 11 million Republic
Bank shares held by Clico and a few other
The fact that the arbitration tribunal has
only valued MHTL at $7.4 billion means that
either much more of the CL Financial empire
would have to be sold to satisfy the group s
debt to the Government or the new share-
holders agreement between the Government
and CL Financial will have to be for longer
than either side expected.
According to a government official close to
the process: "This decision could significantly
change our computations of full recovery and
will now require some hard negotiations with
the shareholder group and some hard deci-
The Government can recover up to $20
billion from the sale of CL Financial assets,
but that would leave very little for the share-
holders of the group who have insisted that
they are entitled to recover some value from
In other words, if the Government pushes
too hard to recover up to $20 billion as soon
as possible, the entire resolution could become
bogged down in legal challenges.
But if the Government does not push hard
enough to recover value from the CL Financial
empire, taxpayers would feel deprived if not
cheated---and there may be political conse-
quences if the CL Financial shareholders are
seen laughing all the way to the bank, while
the taxpayers wait years for full recovery from
the disposal of group assets.
In any event, the timetable for the completion
of the new shareholders agreement began to
tick when the award was received.
The last time the shareholders agreement
was extended, it was until the end of December
or three months after the receipt of the decision
of the arbitration tribunal.
Sources close to Minister of Finance Larry
Howai say the team of T&T attorneys repre-
senting the State, Clico and CL Financial are
reviewing the 150-page decision over this week-
The lawyers have been asked to review the
decision in detail and provide their advice on
the options as the minister hopes to be in a
position to make a full statement on Tuesday.
2) Is US$1.175 million a fair value for
On Friday, an official close to the arbitration
process described the valuation placed of MHTL
as "substantially below true market value."
It is easy to criticise the valuation arrived at
by the arbitration tribunal, if one is seeking
the interest of T&T and its nationals.
But the three arbitrators sat on this matter
for more than three years, heard arguments
and read valuation reports from both sides,
weighed those arguments and reports and after
what seemed like careful consideration, from
March to July, delivered their decision.
The merit of the Government s view that
the valuation the arbitrators arrived at is "sub-
stantially below true market value," is difficult
to assess because determining the market value
of a methanol company that is not publicly
traded is complicated as it involves assumptions
about future cash flows, production and profits.
Most valuations of companies involve looking
at recent transactions in the same industry.
This is difficult in this case because not too
many methanol companies the size of MHTL
have been sold in the last ten years, so there
is not a huge list of transactions to which the
valuation of MHTL can be compared.
Determining the value of a publicly traded
company is much easier because the stock
market does that on a second-by-second basis.
Interestingly, Vancover-based Methanex,
which competes with MHTL in markets around
the world, had a market capitalisation of
US$6.55 billion ($41.26 billion) at the close of
trading on Friday. Methanex operates two
plants at the Point Lisas Industrial Estate,
Titan, which it owns 100 per cent and Atlas,
which it owns 63.1 per cent.
In 2013, Methanex sold 7.9 million tonnes
of methanol: producing 4.3 million tonnes,
selling 2.7 million tonnes of methanol that it
purchased and reporting commission sales of
920,000 tonnes. Their commission sales
include the 36.1 per cent of the Atlas plant
that is owned by BP.
Methanex with sales of 7.9 million tonnes
of methanol was worth US$6.55 billion on Fri-
day. MHTL comprises a complex of five
methanol plants at Point Lisas with a total
capacity of more than four million tonnes per
year as well as 1.48 million tonnes per annum
of urea ammonium nitrate (UAN) and 60,000
tonnes per year of melamine.
Even if one assumes that MHTL s sales of
UAN and melamine have absolutely no value,
the four million tonnes that MHTL produces
should give it a market capitalisation of at
least half of 7.9 million tonne-selling Methanex.
That would bring the back-of-the-envelope
value of MHTL to at least US$3.275 billion,
which is close to a third less than the actual
US$1.175 billion price arrived at by the arbi-
How the tribunal arrived at such a low value
for MHTL is indeed an interesting issue.
Also, given the demand for methanol by
the Chinese, there is little doubt that if MHTL
were placed on the international market that
it would fetch substantially more than US$1.175
3) Can the Government appeal
or challenge the decision?
The award of the tribunal established by the
ICC Court of Arbitration is considered to be
a binding and final decision and one that is
subject to enforcement worldwide.
The Government, CL Financial and Clico
would have entered the process knowing that
the award of the tribunal would have been
final and binding.
According to the Court of Arbitration s Web
site: "There is generally no appeal at all per-
mitted from an arbitral tribunal s award in an
"The result is absolutely final, subject only
to a request to set aside the award due to pro-
cedural irregularities such as an unfair pro-
cedure or arbitrator lack of independence."
There is an international agreement that
governs the enforceability of arbitration awards.
It s called the 1958 New York Convention on
the Recognition and Enforcement of Foreign
Arbitral Awards. The Convention provides for
the enforcement of arbitration agreements
and for the recognition and enforcement of
awards in all contracting states.
T&T became a contracting state in 1966.
Among the established grounds for appealing
an arbitration award is if it can be proven that
the award was procured by corruption, fraud,
or undue means or if there is no factual or
reasonable basis for the award.
It is difficult to conceive that there is no
factual or reasonable basis in a decision that
is 150-pages long, delivered after three years.
4) What will the minority shareholders do?
The minority shareholders may have got a
"steal of a deal" as the Guardian headlined the
story yesterday. But, for them to operate the
Point Lisas complex successfully, they obviously
need the cooperation of the Government in
general, and state-owned National Gas Com-
pany in particular.
Who wants to operate a $15 billion complex
if the supply of natural gas becomes even more
unpredictable in these times of gas curtailment?
No one wants to win the battle, while losing
Will MHTL decision
impact CLF resolution?
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