Duprey's legacy will endure in T&T

Saturday, November 21, 2009 8:16 AM

LATEST NEWS:

Business

Friday, October 30, 2009

Lawrence Duprey's CL Financial empire may have collapsed, but his legacy will live on in the Trinidad and Tobago landscape for a very long time.

Nowhere is this more pronounced than in the local petrochemical industry.

Last week's opening of the first phase of the MHTL's Ammonia- Urea Ammonium Nitrate- Melamine (AUM) complex is just the latest of several major investments for which T&T needs to be thankful to Duprey.

The group has had to give up the assets of Methanol Holdings Ltd to Government as part of the financial bail out MOU.

However, as the occasion of the start of a major downstream petrochemical initiative is marked, it is important to recount the contribution of the Duprey-led CL Financial to the sector over the last twenty years.

Duprey's initial foray into the petrochemical business began in the late 1980s.

It was at a time when the economy was in recession and there was very little investment opportunities.

In his book- Trinidad and Tobago Industrial Policy 1959-2008, Wendell Mottley tells that Duprey and Clico were first interested in participating in a project promoted by Imperial Chemical Industries (ICI).

This deal did not materialise but Duprey was determined to go where no other local business group had gone before.
He persevered with the support of some local energy sector personalities.

In 1991, Duprey consummated a deal with German partners Ferrostaal, KFW and Proman to create Caribbean Methanol Company (CMC). It is a partnership that has grown from strength to strength.

It is often said that fortune favours the brave. So it was for Duprey.

The start-up of the CMC plant in 1993 coincided with an escalation in methanol prices to over US$300 per tonne, which was unprecedented at that time.

The immediate bonanza encouraged Duprey to go further and so over the next fifteen years and CL Financial would become, by far, this country's biggest local investor.

Once he tasted the early success Duprey pumped the profits back into the local industry.

Between 1994 and 1997 CL Financial and its partners, acquired Government's shares in Trinidad and Tobago Methanol Company, and made an investment decision to build a fourth plant. MIV commenced production in 1998.

Not satisfied with the methanol business alone, CL Financial ventured into the ammonia business as well.

In 2002 its first ammonia plant Caribbean Nitrogen Company began operation.

It was soon followed by the Nitro 2000 plant in 2004. The partnership model developed in the Methanol business was duplicated with others in the ammonia business.

For example, in both ammonia projects, the gas supplier and the offtaker (buyer) hold minority shares.

Post 2004 two very significant investments would be undertaken.
Faced with the advent of Methanex - the world largest methanol manufacturer at its door steps, CL Financial with its partners invested in the massive M5000 Plant which remains one of the largest in the world, reaping the benefits of higher efficiencies and economies of scale.

This investment profited immensely from a rapid ramp up in prices to unprecedented levels over the period 2004 to 2008.
At peak, ammonia reached 770 per tonne while methanol crossed the US$ 850 /tonne.

These abnormal prices would have generated equally atypical profitability, which provided the platform for further expansion.

It was not surprising then, when Government proclaimed that it would not approve any new petrochemical projects unless they included a downstream value added component- CL Financial and its partners responded with the AUM proposal.

Duprey and CL Financial are no longer owners of the project but it is important to note that this project marks the first petrochemical plant that would go on to produce secondary petrochemicals like melamine.

In addition to the direct investment in processing plants CL Financial has made other notable contributions.

Firstly, CL Financial seeded the Industrial Plant Services Limited (IPSL formerly PPSL), a private company that specialises in plant operations and maintenance.

IPSL, with a team of 100 per cent nationals, operates all the methanol and ammonia facilities in which CL has an equity interest.
Secondly, MHTL, arguable owns the largest fleet of vessels in the Caribbean.

The first of these dedicated methanol carriers were initially purchased from the Government-owned Shipping Company of Trinidad and Tobago (SCOTT).

Duprey and his partners were also the first to take Trinidad and Tobago energy investments outside, when the company invested in a methanol project in Oman.

Over the last 20 years CL Financial and its partners have invested over US$3.5 billion in the petrochemical industry in Trinidad and Tobago. This is unmatched even by LNG.

The overall economic contribution of CL Financial investments, in terms of increased employment, skills development, management development, foreign exchange earnings and Government revenue are significant, and unmatched.

Judging from the above, can there be any doubt about the impact that Duprey has had on the Trinidad and Tobago economy over the last 15 years?

Now that Duprey has forfeited control of these investments to the State can we look forward to further expansion of MHTL in the downstream petrochemical business?

It is a question that we must all ponder because a negative answer will mean that there is a huge gap waiting to be filled.
Will the local private sector rise up to the challenge?

Trinidad Govt gives CLICO TT$1.9 billion to date

By Aretha Welch

THE Government of Trinidad & Tobago has given Colonial Life Insurance Company Ltd (CLICO) TT$1.9 billion thus far, as part of the TT$5 billion state bail out which had been promised to the cash strapped insurance company at the beginning of the year.

CLICO chairman, Dr Euric Bobb said on the first day of the 6th Annual Meeting of the Caribbean Group of Securities Regulators which began at the Hyatt Regency Hotel in Port of Spain: "The money is to be paid over time, over a very short time. So far we have had $1.9 billion from the Government, through the Central Bank, all the money comes through the Central Bank.

He explained that the money would be issued to the company via bonds and bills of different maturities, so the company could also earn some income from them.

However he said this profit would strongly depend on how well the company manages its present affairs.

In January, the Government moved to take control of CLICO and other companies under the CL Financial umbrella because the company could not repay hundreds of millions of dollars owed to creditors and depositors.

Bobb said the new state appointed board now meets every month, and described this as a "fairly standard approach to governing the company."

He highlighted the fact that most of the members of the new board are non executive members from outside the company.

"Most of the members of the board are non executive, which is very important. The board we replaced were all executives, but you need to have outsiders involved to keep management on a short leash," he explained.

About the statutory fund deficit which left CLICO in a precarious financial position and became public knowledge in January this year, he said, "I'm not worrying about the statutory fund...There is a balance sheet, if you have enough assets in your balance sheet you can ultimately move assets into your statutory fund."

He said they are working on getting the statutory fund (which was billions of dollars in the red) in equilibrium at present. However he said the most pressing order of business was getting the company's entire balance sheet in order.

Should user fees at public health facilities be reinstated?
	Yes
	No

View Results
Results published weekly in Sunday Finance

Username:
Password: