Home' Trinidad and Tobago Guardian : March 20th 2014 Contents BG10 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt MARCH 2014 • WEEK THREE
The state-owned National Gas
Company of T&T (NGC) is
planning to expand into North
America, NGC president Indar
Maharaj said during a March
7 interview at the company s
Point Lisas head office.
"Externally, we are looking at some oppor-
tunities," he said. "In Trinidad, we might be
a big fish in a small sea, but when you get
outside there, you re a small fish in a big sea,
and you can be gobbled up quickly if you
don t understand what you re doing."
Asked for specifics on the external expansion
plan, he said: "Right now, we re looking at
North America, and there is a lot happening
right now in the hydrocarbons business in
North America, and there are certain aspects
of that business that we understand very well.
"We understand the pipeline business. We
understand gas processing. Those are areas
and opportunities that are there for the pick-
ing. What is happening right now in the US
is that there is huge growth in gas production,
and to move that gas which is being produced,
pipelines (must be laid) to the gas processing
plants and so on, and that is right up our
alley. In addition to that, if we can find good
low-risk upstream opportunities, we might
take the opportunities."
Questioned about the type of low-risk
opportunities, he said: "Just like what we did
In October last year, NGC acquired France s
Total s assets in T&T for US$473 million.
Maharaj explained that the assets owned by
Total had already passed the high risk stage.
The high risk stage, he said, is the exploration
"We are not yet big enough for that type
of risk. Assets like Total that are mostly de-
risked" are the types of opportunities that
NGC will be considering in the US, he said.
"Essentially, we developed, in 2011 a strategic
plan, and we re all about developing that plan.
The focus of the plan was: one, to entrench
ourselves in the entire value chain locally; and
two, to move from being locally-based to
globally-based," he said.
The plan is to "secure what we have while
at the same time, invest for the future,"
The NGC president said some of the short-
term goals have already been met, and pointed
to the acquisition of Total s assets in the pro-
ducing Angostura field operated by BHP Bil-
liton, and the increased stake in Phoenix Park
Gas Processors Ltd (PPGPL).
He said, however, for the local part of it,
"getting more involved in the value chain"
and "looking for opportunities downstream"
are still on the cards for NGC, although the
company is taking time to digest its 2013
acquisitions, which exceed US$1 billion.
NGC's liquidity plan
Asked if it s NGC s plan is to keep the liq-
uidity position it has now (estimated by Stan-
dard & Poor s at more than $12 billion), he
said, "Having money sitting idly does not
make any sense, so in fact one of the things
we have started to do---we have brought on
a consultant for our own investments---and
we re doing that with the cash. That s one
aspect of it, and as I said, we went after PPGPL;
we went after Total. That combined was about
US$1 billion in one year. That will take a bit
of digesting. We need to ensure that those
acquisitions are properly optimised."
Moody s, a Standard & Poor s peer, had a
different estimate for NGC s cash balance.
Asked directly, Rebecca Ramdhanie, NGC s
vice president for finance, who was also in
the interview at Point Lisas, said she had only
preliminary, unaudited results which she was
not prepared to share as it had not been shared
with the shareholder, the Government.
On NGC s liquidity profile, Moody s said in
its 2014 rating: "NGC should have good liq-
uidity in 2014. The company has sizeable cash
and short-term investments (estimated at
around US$1.4 billion at year-end 2013), kept
primarily in US dollars, to help maintain oper-
ating and investment flexibility as well as
sound cash flows. Capital expenditures are
manageable, budgeted at US$551 million and
comprised of a number of small projects, the
largest two of which are a new corporate head-
quarters (total cost of US$234 million, US$119
million budgeted in 2014) and a wastewater
treatment plant (total costs of US$181 million,
US$125 million budgeted in 2014)."
Moody s said it expects NGC to fund all of
its cash needs from internally generated cash
flows and balance sheet cash. "Potential oppor-
tunistic investments could, however, prove
actual capital expenditures to be higher than
budgeted. Refinancing risk is minimal given
the company s vast majority of long term debt
(US$400 million bonds) matures in 2036 and
there are no debt maturities in 2014. The com-
pany does not have access to committed credit
facilities but has had minimal reliance on
uncommitted credit lines over the last few
years. We expect that NGC will be in com-
pliance with its covenants in 2014," Moody s
IPO by June
As a government mandate, the 39 per cent
of PPGPL that NGC acquired from Cono-
coPhillips for US$600 million is to be floated
on the local stock exchange to give citizens
direct participation with dividend potential
in the energy sector, Maharaj said. Following
the acquisition, PPGPL is now owned 79.8
per cent by NGC, 10.2 per cent by National
Enterprises Ltd, and 10 per cent by GE (former
General Electric of the US).
"We ll be IPO-ing that very shortly,"
Maharaj said, referring to the initial public
offer (IPO) of shares in PPGPL that NGC was
mandated to place. Asked for a date, he said,
"I wish I could give you a date, give the public
a date, but there are some things that are
within our control, and there are some things
that are within the control of another gov-
Asked for a ballpark date, he said, "By the
end of June, for the latest. Actually, we re tar-
geting much earlier than that, but there are
some issues in there that we have to deal
with, and the reason is that it s a recent acqui-
sition, and there are some things we have to
put in place before we take it to the stock
The share price and the number of shares,
he said, "at this point in time, is confidential,"
but added that the initial offer will be about
50 per cent of what NGC acquired, which
translates to about US$300 million in stock
to be floated.
"NGC has to become a global player. As a
country we have no choice. Our local hydro-
carbon industry is at a very mature stage, and
we need to look at, shall I say more youthful
opportunities outside of T&T," Maharaj said.
Ironically, while credit rating agency Stan-
dard & Poor s pointed to the need for NGC
to broaden its horizons, Moody s suggested
it would frown on NGC s international expan-
sion. In its 2014 rating of the company,
Moody s reaffirmed its Baa1 rating of NGC,
adding that its outlook for the company is
stable. However, the agency said: "While
international opportunities are targeted at
only three per cent of total revenues, should
NGC decide to invest large commitments
overseas, this could possibly affect the com-
pany s business risk profile."
On the other hand, Moody s praised NGC s
conservative fiscal management. The rating
report said: "NGC has exhibited conservative
fiscal management, with good credit metrics
relative to other midstream gas companies,
and state-owned energy companies, both
within T&T and globally, a profitable track
record over its 39-year history, a non-
unionised work force, a stated dividend policy
and clear objectives for achieving specific
return targets on assets and equity."
Further down, the Moody s report said:
"NGC is expected to post strong earnings and
cash flow for the full year 2013, with strong
ammonia prices and methanol prices offsetting
the impact of maintenance-related shut downs
of certain platforms by upstream producers.
"In 2014, NGC s earnings and cash flows
could be modestly weaker as a result of both
ammonia and methanol prices facing down-
ward pressure as additional supplies come on
stream globally. However, upstream mainte-
nance programmes in Trinidad are now largely
completed, and we continue to expect NGC
to produce robust earnings and maintain solid
financial leverage metrics in 2014."
National development agenda
NGC s traditionally high cash position and
earnings profitability has motivated the gov-
ernment to use the company as an instrument
for non-gas industrial development, infra-
structure construction and subsidies to the
weaker state-owned electric utility sector,
Moody s said.
About 19 per cent of NGC s volumes are
sold to the state-owned power company,
T&TEC, Moody s said. NGC s sales agreement
with T&TEC represents NGC s lowest priced
customer (as the Government of T&T deter-
mines the sales price) and NGC has experi-
enced payment delays from T&TEC on numer-
ous occasions since 2005, Moody s reported.
"In 2013, NGC converted roughly US$319
million in past due receivables from T&TEC
into an amortising three per cent, seven-year
term loan, with a maturity date of June 2018,"
Moody s said. T&TEC general manager Kelvin
Ramsook had shared some details of this "loan"
in Parliament on March 11.
"The Government of T&T has used NGC
as a policy tool to build a pipeline to Tobago,"
the Moody s report said. "This pipeline, which
came on stream in 2013 at a cost of US$187
million, is uneconomic due to insufficient
throughput and a low gas sales price.
"NGC was mandated by the Government
to build this pipeline to supply natural gas to
Tobago for power generation and industrial
development; however, without a costly exten-
sion to Barbados, revenue generation from this
pipeline is insufficient to recover operating
costs. The Government of T&T remains in
negotiations for the Tobago-Barbados pipeline
extension to be implemented and operated by
a third-party company. NGC is expected to
take a ten per cent stake in the Tobago-Bar-
bados pipeline project."
The Tobago-Barbados pipeline is to be oper-
ated by Beowulf Energy of the US.
The North-East Offshore (NEO) pipeline
that was undertaken to expand NGC s offshore
capacity has been completed, Moody s report-
ed. "Construction of this pipeline was com-
pleted for a hefty cost of about US$580 million,
but will remain underutilised for at least the
next two years because the additional down-
stream plants expected to come on stream did
to expand to
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