[Barbados, Fuellers] Major energy shift
- BNOCL could be next to go
April 21, 2017.
If Minister of Finance Chris Sinckler were to follow to a ‘t’ the advice that has been given to him by the recently appointed Fiscal Deficit Committee of the Social Partnership, Government would not only be selling off the Barbados National Terminal Company Limited (BNTCL), but its energy parent – the Barbados National Oil Co. Limited (BNOCL) — as well as the National Petroleum Corporation (NPC), the statutory body responsible for managing the distribution of the country’s natural gas supply.
Barbados TODAY has obtained a copy of the tripartite committee’s 30-page report, which addresses frontally the need for divestment and reform of state-owned enterprises (SOEs) as a means of realizing savings, including on subventions and transfers in the amount of $250 million.
The report also endorses the recommendations of a recent PriceWaterhouseCoopers (PwC) study on SOEs and recommends immediate implementation of its approach to reform of 57 state agencies, including BNTCL, whose planned sale to the Sir Kyffin Simpson-led Sol group is currently the subject of litigation, as well a Fair Trading Commission investigation.
Earlier this month, the High Court granted an interim injunction to Sol’s competitor Rubis, stopping the controversial multimillion dollar sale of the oil terminal in its tracks and throwing a spanner in the works of Government’s plan to beef up the dwindling foreign exchange reserves, which had fallen to a 14-year low of 10.3 weeks of import cover as of the end of last year.
Rubis had lodged an application for a judicial review, challenging the inclusion of a 15-year moratorium clause in the agreement between Government and Sol for the US$100 million merger, which the FTC is currently probing to determine whether or not it should be approved.
The clause prohibits the construction of another oil terminal in Barbados, as well as the granting of licences for the storage of fuel, aviation fuel and jet fuel for the commercial and industrial purposes.
After the international ratings agency Standard & Poor’s had downgraded Barbados from B- to CCC+ last month, Minister of Finance Chris Sinckler had said he was confident the FTC would approve the sale which, when taken with a draw down which was expected from the Sam Lord’s Castle development project and a First Citizens bank loan, would return the reserves to “well above” the desired 12 weeks of imports.
With the BNTCL matter still tied up in court, it remains to be seen whether Government would be prepared to start the process of selling off either BNOCL or NPC at this time, or whether it might not be better to look elsewhere for opportunities for divestment, given the significant implications for the energy sector and the country as a whole.
The PwC study also recommends the sale of the Barbados Cane Industry Corporation; Barbados Conference Services Limited; Southern Meats Limited, Caribbean Airways International Limited; Hotel & Resorts Limited; Needhams Point Development Inc and Needham’s Point Holdings Limited.
But while there has been much talk late of getting rid of the loss-making Caribbean Broadcasting Corporation, the most that is contemplated for the state-broadcaster at this stage is partial divestment.
In its report presented back in February, PwC, which carried out its study under the auspices of the Central Bank, also recommended partial divestment of the Barbados Port Inc, Grantley Adams Airport Inc and Caribbean Aircraft Handling.
The report also suggested merger of several SOEs, namely Fund Access with the Enterprise Growth Fund; the Barbados Agricultural Management Company with the Barbados Agricultural Development and Marketing Corporation; the Rural and Urban Commissions; the Barbados Community College with its hospitality school, Erdiston and the Samuel Jackman Prescod Polytechnic; the TVET & Vocational Training Board; and the Barbados Tourism Investment Inc with the Barbados Investment and Development Corporation and Invest Barbados.
The report also recommends that the Barbados Transport Authority, the Barbados Water Authority, Caves of Barbados Limited, the Gymnasium Limited, Kensington Oval Management Inc, the National Housing Corporation and the Transport Board be made to optimize effficiency and recover all costs by way of fees.
It also said that all other SOEs, including the state-run Queen Elizabeth Hospital and the Sanitation Service Authority should optimize costs and service delivery.