FINANCE BY DAVID WALKER ACCOUNTANT & DATABASE EXPERT
It is difficult to count the ways in which our leaders have mismanaged the Petrotrin refinery. It was mismanaged most hideously by the Directors over the years who made the commitments to hugely unwise and unproductive investments to the tune of twelve billion dollars. That depth of mismanagement is difficult to fathom, yet not one director has been held to account. They may still be sitting on State boards today.
Besides investing in valueless enterprises on such a vast scale, they financed these projects at the astronomical cost of 9.75% per annum. That means the nation is paying roughly 1.2 billion dollars annually on interest on loans which produce no value. Government-backed borrowings, which these effectively were, should not have cost more than 5% per annum in interest. Someone should have to explain why we are paying a premium of almost 600 million dollars annually on this debt. The further question that must be asked is “did Cabinet approve these investments and the associated loans as they accumulated over ten years or
Three studies costing around $90m and not one of them recommended the closure of Petrotrin
We had to do something. Or rather we chose to do anything that Cabinet suggested because we all agreed that we had to do something. It is useful at this point to note that three professional studies had been undertaken on the status of Petrotrin and its refinery at a cost reported to be around 90 million dollars. Each of them resulted in considered recommendations. While they differed in many respects, they were at one in not recommending the closure of the refinery.
Naturally, therefore, our government decided to close the refinery with the loss of 5,000 jobs at a cost of several billion dollars and untold contagion to the economy of the nation in general and the regions adjacent to the refinery in particular. Ministers painted this as “tough love” and boasted of their testicular fortitude in making this bold decision in the face of widespread opposition. I wonder where was that testicular fortitude while 12 billion dollars was being misspent creating a debt carried at almost double the expected rate for such projects.
• Disastrous and costly decisions by the Directors. Not one Director punished or even shamed.
• The country left holding an annual bill of 1.2 billion dollars in interest.
• The refinery shut down with disastrous impact on the economy of Trinidad and Tobago and the livelihoods of up to 10,000 persons against the clear recommendations coming from expensive professional studies that pointed to better paths to a resolution.
• No elimination or reduction of the debt burden and its annual cost.
Could it get any worse?
Our political leaders are mining a particularly rich seam of stupidity and counter intuitivity. Unfortunately, they have also been able to persuade a significant proportion of the population that up is down and down is up. Recall that they themselves told us that the refinery, or perhaps Petrotrin as a whole was losing 2 billion dollars a year prior to the closure of the refinery. Recall that the then Chairman Wilfred Espinet told us that the refinery was of no value and that nobody would pay for it hence it had no value. These were not simply casual comments. These were at the core of the arguments in support of the refinery closure and the dismissal of 5,000 workers.
OWTU has allowed itself to be nudged into a position of almost certain failure
Remarkably, within a year or so, the refinery and its assets that we were told had no value, was able to attract more than 70 bidders. Out of that group we hear that there were three credible bidders and that one, OWTU was judged to be the most attractive. Was Mr. Espinet being deceitful in his earlier statement? Was the government and the Board of Directors simply spectacularly wrong about the value and prospects of the refinery? Has anyone in authority sought to explain this most amazing turnaround while the refinery was lying idle? Has this development confirmed that the three consultants’ reports were correct? Has this development now confirmed that the closure was a disastrous misuse of public assets? My answer is a resounding YES in each case.
It gets worse. I say this with a heavy heart as my writings pay testimony to a great appreciation of the role of Unions as a balance to unfettered power or the owners of capital. I have regularly defended Unions and Union leaders against what I consider to be unfair criticisms from many quarters. It, therefore, pains me to say that the OWTU has allowed itself to be nudged into a position of almost certain failure, probably as part of a political play by our leaders.
At the heart of this proposed sale arrangement is a very simple premise. It is that the OWTU is somehow going to be able to take a business that was losing 2 billion dollars annually just a year ago and turn it into a profit maker in short order. Does that make sense? Does anyone involved in this understand what it takes to generate a two billion dollar per year improvement in a company’s operations? I would not expect a team without the relevant expertise and experience to achieve even a 100-million-dollar turnaround, never mind two billion. I await a cogent explanation of how a trade union is going to achieve that turnaround.
And what will the impact of this investment be on the Union’s core operations and stability? Once the Union becomes an employer, I expect that its role on behalf of workers inside and outside of the refinery to come under intense strain. Is the Union fully cognizant of those challenges, and does it have a plan for them?
The Petrotrin sale to the OWTU is a Trojan horse
I’m also concerned about the potential impact of this investment on the financial stability of the union. If the Union is to truly have leverage over these assets, then it surely has to commit a significant amount of its own assets to the cause. No major financial house is going to put up most of the capital without taking major control. What is the arrangement to be as between the Union and the financiers?
Should the venture fail to meet expectations, what impact will that have on the assets of the Union, and the control and ownership of the refinery? One could easily envisage a situation where a failure to achieve targets results in financial losses to OWTU, and the transfer of refinery assets to as yet unknown third parties.
I know that it feels almost romantic to say that workers will be in control of the assets of the company. I fear that this agreement is instead a Trojan horse designed to coerce the Union into losing its clear raison d’etre on behalf of the workers, weakening it financially, and handing control of the refinery assets to a third party in a fire sale after predictable
Things are already bad, but they’re about to get a lot worse in this 12-billion-dollar tragedy.