FINANCE Minister Colm Imbert says the fact the Pointe-a-Pierre refinery is being sold debt free means that the new owners can make it profitable.
He made the point at a news conference on Wednesday.
Patriotic Energies and Technologies, the wholly owned company of the Oilfield Workers Trade Union (OWTU), is the preferred bidder for the refinery. OWTU was the union that represented the workers of Petrotrin that previously operated the refinery.
Imbert said one of the reasons why Petrotrin was unprofitable was that it was burdened with debt amounting to US $1.9 billion – mostly in foreign debt. He added that Petrotrin also had high operating costs.
Answering the question that if the refinery was unprofitable over the years, why would the new entity now make a profit, he said the answer was a simple one.
Imbert said, “The refinery was saddled with huge debt, billions of dollars of debt.
“Any person taking over the refinery now will not have to carry that debt, which was a tremendous drain on the revenue being derived from the refinery. The refinery is going forward debt free.”
He said, “Secondly, the refinery had extremely high operating costs. It was overstaffed and it was never able to make a suitable profit because of its very high operating costs.
“We do not expect any entity, including Patriotic, to operate the refinery with the same number of employees or the same cost structure that was there before.”
Imbert said he expected Patriotic to restart the refinery within 12 months since it does not have to immediately come up with the US$700 million payment.
Imbert put forward a “more realistic figure” of US$500 million to refurbish the refinery in the first year.
Regarding the bids for the refinery, he said 77 were initially received and this was narrowed down to 25. He said eight submitted non-binding offers and BB Energy and Sol lacked proposals to restart the refinery and so were cut.
Imbert said Edgewood Holdings did not go forward since it did not have a refinery-operating partner and another company had dropped out due to a lack of refinery experience.
He said the bids closed in August with Beowulf Energy, Klesh and Patriotic in the running.
Imbert noted that Beowulf had two former Petrotrin managers in its team, Klesh had a refinery in Germany and Patrotic had local expertise.
He said Beowulf said it could take between 15 to 21 months to restart the refinery while Klesh said “as soon as possible” and Patriotic gave 12 months.
Imbert said Patriotic also had the most significant sum in its bid of US$700 million while Klesh offered nothing and Beowulf offer was US $42,000 per month for 15 years.
The Finance Minister said, “We also had to take into context the refinery refurbishment cost. We decided we wouldn’t require immediate payment so Patriotic could get on with the business of refurbishing and restarting.”
Imbert said the evaluation committee that selected Patriotic was chaired by the permanent secretary in the Ministry of Finance, Vishnu Dhanpaul.