In the interest of fair play BU shares an interesting interview hosted by Jeremy Stephen with SOL principal Ezra Prescod. The purpose of the interview is meant to give balance to other interviews carried by Jeremy Stephen in the past with the RUBIS principal. Local economist Jeremy regularly post to the Facebook medium to share concerns with his followers. The interview in our non technical view was a little contrived but welcomed nevertheless to support demystifying the contentious issue of the BNTCL sale by government to SOL and the subsequent challenge by RUBIS.
This transaction is obviously driven by government’s thirst for forex, one wonders if the government retains control of BNOC i.e. importations of fossil fuel, why not retain control of the distribution which is an easy earning opportunity based on applying a markup on the distribution of product. Why does SOL want to buy BNTCL if the government is committed to a green economy sometime in the near future and if realized will reduce throughput to BNTCL and therefore revenues?
Hopefully members of the BU intelligentsia will probe this matter in areas Jeremy failed to tread.
The Barbados Integrity Movement (BIM) has issued a highly critical statement about the lack of action by the Barbados Labour Party over its handling of the BNTCL issue.
On January 4th, 2017 it was announced that the DLP administration had signed a sale agreement on January 3rd, 2017 and would be selling our national asset and family pearl the Barbados National Terminal Company Limited(BNTCL) to the Simpson Oil Limited Group through its St. Lucia based company the Barbados National Terminal Company (St. Lucia) Limited.
The Leader of the Opposition Ms. Mia Mottley QC, MP hurriedly carried a press conference at the office of the Opposition with both Mr. Kerry Simmons MP and herself to address the danger of this potential sale.
Neil Holder took the decision as the leader of the Barbados Integrity Movement (BIM) to first call in on Brass Tacks the Sunday morning following the announcement by the DLP administration regarding the proposed sale to express nationally that BIM will do all in its power to halt the sale since it would potentially hurt All Barbadians.
A BIM press conference would ensue during the following week to alert all Barbadians that BIM would be launching a Petition to have the general public engaged to help us to halt the sale of the BNTCL. A campaign ensued where BIM vigorously questioned the Fair Trading Commission (FTC) as to the process and procedures surrounding the sale.
It was at this point that BIM came to the realisation and the FTC conceded that the documentation provided for the public scrutiny was indeed prepared by the SOL Group and Not the FTC as mandated!
The outcome of the sale is now known to all of us!
However, our concern is the fact that this process has had no support from the Leader of the BLP Opposition Ms. Mia Motley to stand in solidarity to work alongside another entity seeking to save the nation of Barbados from what could have been potentially another unsavory transaction where the DLP administration would have uncaringly thrown the country to the wolves!
For what ever reason the leader of the Opposition Ms. Mia Mottley remained silent throughout what would be almost a year! Our question is, the BLP led by Ms. Mia Mottley is now before the country seeking a mandate to become the next government; why was there no opposition or participation in any tangible way to stop the sale of the BNTCL?
Why was Ms. Mia Mottley silent on this and many issues which would have required her vigorous intervention?
Was it because there was no publicity in staging a march of any sort so as to highlight the BLP team all in red?
The Opposition leader Ms. Mia Mottley has dropped the ball on this potentially detrimental national issue for reasons that may be best known only to herself!
For this reason, we say to Barbadians that neither the BLP nor the DLP administration can be considered for election to office during the upcoming constitutionally due general elections to be held later this year. They have both failed us as a country!
As such, BIM is once again calling on the leader of the opposition BLP Ms. Mia Mottley to join the leader of the BIM Mr. Neil Holder in a National debate to tell the people of Barbados what our plans will be to take Barbados forward!
It’s time for Real CHANGE Not Exchange!
Warm regards
………………………………………….
Neil A. Holder CHAIRMAN AND POLITICAL LEADER
Nelson statue on Broad Street defaced on the eve of Independence Day.
Some of my more literate readers will recognize that I have borrowed the title of today’s column from the BBC comedy show of the 1960’s that satirized the week’s developments and news stories. I do not at all possess the satirical or comedic talents of the BBC’s scriptwriters, but some events of last week do merit further exposition. Moreover, with the radio talk shows on a self-enforced break so as to take advantage of the lucrative pre-Christmas commercial offerings, I suppose that people will do a lot more reading of the newspapers and the blogs to keep themselves abreast of local current affairs.
One of the highlights of the week was the public anticipation of the decision of the Fair Trading Commission [FTC] on the legal validity of the SOL/BNTCL merger as proposed. Since I currently have the honour of chairing that institution, I paid especial attention to the populist public discourse on the matter. What struck me most about that phenomenon was the seeming consensus among those who aired their views publicly that the merger should not eventuate into approval by the FTC.
So much so that when one newspaper suggested, even before the decision was published, that the sale had been approved, it provoked comments that I consider defamatory of myself from one source, clearly without the slightest clue as to the law relating to fair competition, that “integrity needed to be returned to the Commission” while making mention of the last two years, the period that coincides precisely with my tenure as Chairman. I have accordingly referred the matter to my legal advisors and will say no more on that for now. His was clearly a purely partisan view, based wholly on the perceived sentiments of those to with which he may be politically aligned.
There seems for some reason to have been a general public anticipation that the sale would be approved or maybe it was the case that there had been some misleading leak of the Commission’s deliberations, since another section of the press, not the Barbados Advocate,also boldly suggested in its Tuesday edition that the “FTC [was] set to okay the BNTCL sale.” On the subsequent publication of the decision to the contrary, that section of the press, to my best recollection, did not even deign to concede the inaccuracy of its Tuesday item. Ah, well.
It is clear, and perhaps understandable, that some members of the public perceived the issue as a partisan political matter. If approved, a victory for the DLP, if not approved, a regrettable loss. This is indeed a pity, but par for the course in Barbados, especially at the current time when much is viewed through partisan lens. I am pleased to relate that both the technical staff involved and the members of the Board of the Commission dealt with the matter judiciously as one of applying the relevant law and economic theory of fair competition to the proposed agreement between the parties and took all relevant admissible evidence into account.
A work of art
Another divisive event that took place during the week was the re-decoration (I put it no higher or lower than that) on the eve of the observance of our 51st anniversary of Independence of the statue of Lord Nelson in Heroes’ Square in the national colours. It seems clear that the occasion was chosen with some care, to highlight no doubt, the incongruity of the substance of the next day’s celebration with the prominence of the Nelson statue in the equivalent of the national pantheon.
In this context, public reaction again varied, though not necessarily on partisan political lines this time. Rather, it lay in the unstated but nearly palpable distinction among those who wondered how we would appear to others if we were to permit the destruction of national monuments with impunity and who therefore appealed for condign punishment for the culprit(s); those who view Nelson as some totem of the whitish Barbadian and for whom his removal would be anathema; those who consider the statue to be a blot on our current national ethos undeserving of such geographical prominence; and perhaps those who do not consider the current placement of the statue to be even worthy of contemporary discussion.
Officialdom, of course acutely sensitive to the majority public opinion at this time, came down safely on the side of law and order and cowered under the promise of a national conversation on the matter; as if these ever result in anything other than an intermittent resumption of the debate every six months or more. Whither, one may ask, the “national debate” on formal constitutional republican status for Barbados? Whither the “national debate” on the execution of the death penalty? Whither the national debate on corporal punishment in schools?” All kicked down the road until the next time with a promise of an imminent national discourse. Given our cultural penchant for talking over doing however, [with of course the exception of the Nelson decorator(s)], it may be just as well.
Of course, the apt democratic mode of resolution would be to refer the matter to a plebiscite but, given the unpredictability of these and the natural fear of a governing administration to have any substantive indication of being out of step with its electorate, this seems most unlikely.
As if this were not sufficiently heady, a local historian managed to introduce another intriguing angle to the entire debate. According to Dr Karl Watson or, at least, the newspaper headline, “Nelson was not pro-slavery”, a proposition not at all proven in the text of the published article that appears to suggest rather that the Admiral acted merely as a tax collector on the island for the British government and points to no utterance of his or other evidence that might support the assertion in the headline. More debate is expected.
Submitted by Neil a. Holder, Political Leader of Barbados Integrity Movement
Dear Barbadians,
We are exceptionally pleased with the ruling of the Fair Trading Corporation (FTC) in its decision NOT to support the sale of our National Asset the BNTCL at this time in its current form.
The Barbados Integrity Movement (BIM) sees this ruling as small victory in our monumental task of bringing integrity to governance and the delivery of prudent and transparent stewardship when given the mandate to make decisions on behalf of the people of Barbados.
Suffice to say that the Barbados Integrity Movement (BIM) has from inception called for the rejection of this transaction after its careful review of the documentation provided by the FTC which was prepared by the SOL Group for issuance to the Barbadian public for review where BIM has cited that this “Deal of the Century” would be extremely detrimental to our country!
We are happy that the concerns eventually highlighted by the FTC were in tandem with those raised by BIM in its petition and subsequent utterances in the media over a protracted period.
Since all of those concerns have already been vented and are now in the public domain, BIM proposes the following as the strategy forward:
That All Barbadians be granted permission by the Minister of Finance to establish US Dollar (USD) Accounts in Barbados at the bank/financial institution of their choice.
That these accounts will be interest bearing “Tax Free” accounts.
Barbadians be granted the freedom to bring into the country any amount of foreign currency (particularly USD) from a legitimate banking institution once all KYC and AML regulations are met!
That an Initial Public Offering (IPO) be put out for USD shares in the BNTCL whereas USD$100 Million can be raised through average Barbadians who may be interested in having shares in the ownership of the profitable BNTCL.
The share capital of the BNTCL be evaluated based upon the present day value of the organisation taking into consideration the profitability.
Issue an allocated sum of shares to be equally purchased in USD between the two petroleum products providers SOL and RUBIS.
Issue an allocated sum of shares to be purchased by the Cooperative movement in Barbados.
In this regard, we feel that the aforementioned approach is fair and equitable to all parties.
National assets such as the BNTCL which has the potential to harm our foreign reserves and create unsavoury monopolies, unfair competition and potential loss of revenue to the Government of Barbados should Never be considered for sale!
The Barbados Integrity Movement (BIM) will not permit now or in the future a sale of the BNTCL to be approved unless the aforementioned conditions are met and Barbadians of all stations in life can own a piece of any such entity.
The Clement Payne Movement sent out a Press Release yesterday pertaining to the Fair Trading Commission’s decision on the proposed sale of the BNTCL to the SOL group of companies and other related matters. Unfortunately we were operating on the basis of erroneous information published in the Nation Newspaper about the said FTC decision. Now that the content of the FTC decision has been made clear, we have amended and revised our Press Release as follows :-
The Clement Payne Movement denounces the decision of the current Democratic Labour Party (DLP) administration to privatize our state-owned Barbados National Terminal Co. Ltd. (BNTCL) by selling it to Mr Kyffin Simpson’s SOL group of companies, and we applaud the recent decision of the Fair Trading Commission NOT to approve the said sale.
Indeed, we consider the actions of the Freundel Stuart administration to be particularly disgraceful, in light of the fact that they contested (and won) the 2013 General Elections on an anti-privatization platform .
Not only did they solemnly promise the Barbadian people that a re-elected DLP Government would preserve our state-owned enterprises, but they also assured us that they were saving us from dastardly BLP privatization intentions!
Needless-to-say, they shamefully betrayed this solemn undertaking by entering into a contract with Mr Simpson’s conglomerate to sell it not just “a” state-owned enterprise, but to sell it the single most valuable and profitable enterprise owned by us, the people of Barbados .
But, not only is the Stuart administration guilty of deceit and treachery, it is also guilty of being captive to a very backward and reactionary right-wing concept of governance.
You see, Mr Stuart’s administration– like virtually all other elements of the current Barbadian political class — seems to believe that a government must be run solely and totally on the basis of taxation. In other words, that the revenue the administration needs to provide government services must come solely from taxing the people and firms of the country.
Indeed, they are so captive to this backward idea that they are seemingly incapable of understanding the necessity of a Government possessing profitable state enterprises that can earn revenue for the Government — revenue that can be applied towards providing the services that the people need.
Clearly, Mr Kyffin Simpson’s company wishes to acquire the BNTCL because it is a profitable enterprise that will earn valuable revenue for the SOL group of companies for many many years into the future.
Well, why can’t Mr Stuart and Mr Sinckler appreciate that we — the citizens of Barbados — wish to continue to own our BNTCL for precisely the same reason ? We are not merely interested in receiving a one-off payment of sixty or eighty Million dollars for our BNTCL ! Rather, we wish to continue to have ownership of this valuable company and have it deliver annual profits for us for many decades to come.
Over the past twenty-five years Barbados has been plagued by silly and treacherous governments that have privatized and divested such valuable and profitable state enterprises as the Insurance Corporation of Barbados, the Barbados National Bank, Barbados External Telecommunications, and the Pine Hill Dairy. And now they propose to sell off the “jewel in the Crown” — the BNTCL.
The message that the successive pro-privatization Administrations have been sending us is that they are of the view that all profitable enterprises that are capable of earning revenue for their owners must be in the hands of the Private Sector, and that Government is to only own unprofitable, loss-making enterprises !
WE DENOUNCE THE DECISION TO APPROVE THE SALE OF THE BNTCL
The Clement Payne Movement denounces BOTH the initial decision of the current Democratic Labour Party (DLP) administration to privatize our state-owned Barbados National Terminal Co. Ltd. (BNTCL) by selling it to Mr Kyffin Simpson’s SOL group of companies and the recent decision of the Fair Trading Commission to approve the said sale.
Indeed, we consider the actions of the Freundel Stuart administration to be particularly disgraceful, in light of the fact that they contested (and won) the 2013 General Elections on an anti-privatization platform .
Not only did they solemnly promise the Barbadian people that a re-elected DLP Government would preserve our state-owned enterprises, but they also assured us that they were saving us from dastardly BLP privatization intentions!
Needless-to-say, they shamefully betrayed this solemn undertaking by entering into a contract with Mr Simpson’s conglomerate to sell it not just “a” state-owned enterprise, but to sell it the single most valuable and profitable enterprise owned by us, the people of Barbados .
But, not only is the Stuart administration guilty of deceit and treachery, it is also guilty of being captive to a very backward and reactionary right-wing concept of governance.
You see, Mr Stuart’s administration– like virtually all other elements of the current Barbadian political class — seems to believe that a government must be run solely and totally on the basis of taxation. In other words, that the revenue the administration needs to provide government services must come solely from taxing the people and firms of the country.
Indeed, they are so captive to this backward idea that they are seemingly incapable of understanding the necessity of a Government possessing profitable state enterprises that can earn revenue for the Government — revenue that can be applied towards providing the services that the people need.
Clearly, Mr Kyffin Simpson’s company wishes to acquire the BNTCL because it is a profitable enterprise that will earn valuable revenue for the SOL group of companies for many many years into the future.
Well, why can’t Mr Stuart and Mr Sinckler appreciate that we — the citizens of Barbados — wish to continue to own our BNTCL for precisely the same reason ? We are not merely interested in receiving a one-off payment of sixty or eighty Million dollars for our BNTCL ! Rather, we wish to continue to have ownership of this valuable company and have it deliver annual profits for us for many decades to come.
Over the past twenty-five years Barbados has been plagued by silly and treacherous governments that have privatized and divested such valuable and profitable state enterprises as the Insurance Corporation of Barbados, the Barbados National Bank, Barbados External Telecommunications, and the Pine Hill Dairy. And now they propose to sell off the “jewel in the Crown” — the BNTCL.
The message that the successive pro-privatization Administrations have been sending us is that they are of the view that all profitable enterprises that are capable of earning revenue for their owners must be in the hands of the Private Sector, and that Government is to only own unprofitable, loss-making enterprises !
In response to Minister of Finance Chris Sinckler’s criticism about the length of time the Far Trading Commission (FTC) has taken to deliver its final decision on the application for SOl to acquire BNTCL, Chairman of the FTC Jeff Cumberbatch shared the following press statement [16 November 2017]. The final decision on the matter is to be made on November 23, 2017. It is interesting to note that the FTC held in-camera sessions as recent as 23 October 2017 pursuant to 26 (2) of the Fair Trading Act, AND, Minister Sinckler launched his criticism on the 10 November 2017.
The Barbados government is desperate to bolster its foreign exchange reserves which based on recent reports has fallen to an uncomfortable low of 9 weeks cover. It is a pity the country finds itself in a place where profitable state assets have to be dumped to support consumption spending by the country.
Further to a story carried on the back page of the Sunday Sun – July 2nd, 2017 informing of the Initial Findings of the FTC regarding the decision of the DLP Government of Barbados to sell the BNTCL to the SOL Group!
BIM sincerely congratulates the FTC in its role as the regulatory agency acting for and on behalf of the people of Barbados. BIM has been tireless in the fight to bring our findings of the proposed BNTCL sale to the SOL Group into national focus citing that the fundamentals of the proposed sale would be detrimental to all Barbadians.
The FTC has demonstrated to Barbadians that beyond the muscular display of the ruling government in the Ministers of Energy and Finance’s collective attempts to fleece this potentially injurious transaction upon the people of Barbados that in its mandate which was legitimized by an Act of Parliament; the FTC is and will act without fear and favour to bring equity and justice to bear.
BIM wishes to thank all Barbadians wo supported us in signing our Petition to Halt the Sale of the BNTCL to the SOL Group in the interest of protecting the future of our petroleum sector from the possibility of another monopoly. In this regard as outlined by BIM in its findings during the limited time given to investigate and peruse the available documents, the sale transaction in our opinion appeared to be only beneficial to the SOL Group.
Our discovery that the throughput rate would have immediately been increase by 35% at the conclusion of the sale have only been solidified in the report of the Sunday Sun of 02/07/2017 where it was outlined that this initial increase which was agreed to by the DLP government was not acceptable to the FTC.
It is unimaginable that our very government would have agreed to a transaction that would have been by its very intent financially hazardous to its citizens in favour of private commercial interest.
This brings into focus the very fact that we have to be extremely vigilant in all decisions made by the DLP administration which seems to have an insatiable and reckless thirst for entering into financial commitments and contracts without proper Due Diligence and regard for it will affect our citizens. BIM is concerned that the local Credit Union movement has not expressed an interest in part or full ownership of the BNTCL thereby protecting the petroleum industry in Barbados against monopoly and unfair business practices.
It is against this backdrop that we are calling for the sale of the BNTCL to be equally divided into three (3) owners representing the two (2) major petroleum interest being RUBIS and the SOL Group with the third party being potentially the Credit Union movement.
This approach will cement fair play in the industry and guard against indiscriminate price gouging and unfair competition. We call on all Credit Union members to support BIM in the engagement of their leadership to enlist their respective organisations in the potential ownership of the BNTCL which is perhaps the only consistently profitable state-owned operation.
We are disappointed however that none of the current opposing political parties (the BLP, CAP, Solutions Barbados or the UPP) have joined in this cause of national significance to bring to the public’s awareness the potential dangers of this proposed sale.
Once again, we wish to congratulate the FTC for its fair, prudent and justified decision not to agree to the sale of the BNTCL to the SOL Group at this time.
Peter Wickham described Barbados Underground recently as the Eric Fly of this time. Living up to the characterization- although a more euphemistic description in the view of the BU household is that we are a fiercely patriotic Bajan family -two recent events should give Barbadians reason to pause.
The Hyatt Hotel project to be developed by a local company under the title Vision Development with principal Mark Maloney, AND, the BNTLC sale to SOL have been forced to freeze rollout because the court has issued injunctions. David Comissiong in his capacity as a concerned citizen advocate was successful in the case of the Hyatt Hotel project and RUBIS Barbados the other.
Why are the two events important?
Barbados continues to be affected by a protracted weak economic performance triggered by the global economic crisis of 2008. We are a country dependant on revenues from tourism, international business and foreign direct investment. Economic analysts agree if Barbados is to support the standard of living we have become accustomed and addicted- one largely built on consumption behaviour -it is important for the three sectors to be performing together. Although the government promotes the ‘success’ of the tourism sector, unfortunately it does not have the earning capacity to satisfy our level of expenditure. This is important because Barbados is a significant net importer of goods and services and saddled with the current economic model means we must EARN and BORROW foreign exchange to ballance the chequebook.
In the 2017-2018 Estimates Debate foreign inflows announced by the minister of finance Chris Sinckler to be generated from the Hyatt and BNTCL projects were expected to top up government’s dwindling foreign reserves. Sinckler’s position echoed that of the Prime Minister’s delivered at the BCCI luncheon in January of this year:
These “delayed inflows” that were on the way included funds from China for the start of the construction of the new Sam Lord’s Castle, and the expected sale of the BNTCL to Simpson Oil Ltd. for US$100m. Mr. Stuart said that within a week of the luncheon he expected to be able to give the green light to the proposed Hyatt Hotel project in Bridgetown, and then offered a list of upcoming hotel projects which would bring more foreign investment into the country – Broad Street Journal
Now that David Comissiong and RUBIS Barbados have been granted a temporary injunction by the Courts of Barbados one has to ask how will this affect government’s plan to generate economic activity and to earn foreign exchange. It is important for Barbados to break free from the anaemic economic performance of the past eight years if only to dissuade the analysts from S&P and Moody’s from assigning a credit rating of D. Contrary to the view of government talking heads, further credit rating downgrades will continue to chase away foreign investors. BU is acutely aware however that we are in the silly season. The timely rollout of the Hyatt project and sale of BNTCL will have a negative impact on government’s economic plan. BU speculates if the decision to seek injunctive relief by RUBIS was triggered by a green light notification from the FTC.
In a situation where two significant projects will suffer delays a normal response from a responsible government would have been to issue a statement informing the citizenry of plan B. Not surprising however has been the silence from the Stuart administration since the development. After all this is a government that has distinguished itself by giving lie to Abraham Lincoln’s view of how a democratic government should function by being a government of the people, by the people, for the people.
The promotion and maintenance of fair competition requires that business activities and trading practices be closely monitored and scrutinized to ensure that consumers’ welfare is protected and their interests served through competitive markets. This requirement seems particularly appropriate in the proposed sale of BNTCL to SOL, an agreement that appears difficult to justify.
Anti-competitive market behavior and concentrated market power can be justified if based on public interest grounds, and if such actions promote economic progress and real efficiencies of which consumers can share. Consumer welfare is therefore paramount. It is considered the key driver of fair competition policy, but also it brings with it, to center stage, the important concept of market power. The nexus of consumer welfare and market power is well established. Dominant firms have the ability to use their market power to either raise prices above competitive levels or restrict their rivals’ output. Such actions contribute to the detriment of consumers by reducing their welfare and by transferring wealth to producers.
Fair competition deliberations that attempt to determine the extent of a firm’s market power must begin with a clear definition of the relevant market. This is a necessary first step in arriving at an entity’s market share, which in turn is a proxy measurement for market power and dominance. In our jurisdiction, the threshold of excessive market power in merger investigations is a 40 percent market share.
Since this threshold has been exceeded in the proposed merger, regulators are now required by law to examine the legality of this agreement. To do so, they need to weigh certain factors. First, they must look at the structure of the market likely to be affected by the merger; second, they must determine the degree of market power and control that will be exercised by the enterprise concerned; third, they must determine whether this merger is likely to serve as a detriment to competition; and fourth, they must evaluate the likely impact of this merger on consumers and on the economy.
In analyzing the market structure for petroleum products, one will immediately recognize that there are two relevant markets to be considered in this merger; one upstream and the other downstream. The upstream market is currently dominated by BNTCL, an unregulated public monopoly, which offers, at a minimum rate of return, services that relate to the bulk receipt, storage, and delivery of petroleum products. The ownership and operations of this entity, post acquisition, will change to that of a regulated private monopoly that enjoys a guaranteed utility rate of return.
The downstream market is made up of two segments, one regulated and the other unregulated. In both of these markets segments BNOCL is the sole importer of petroleum products, except for LGP, aviation fuel and marine fuel. The regulated segment is one in which the Division of Energy controls the retail pump prices of gasoline, diesel and kerosene products, and which represents 48 percent of local throughput volumes. SOL already controls 70 percent of this segment.
The retail pump price in this segment is built-up from several sources that include government taxes (V.A.T. and excise) and a CESS of 22 cents per litre on gasoline and diesel. The CESS was introduced in 2009 as part of a loss recovery pricing mechanism, designed to halt the losses on the sale of gasoline and diesel, and to facilitate the recovery of earlier losses brought about by subsidies. The CESS currently generates 46 million dollars in revenue based on a yearly throughput of 1,242 million barrels of these fuels. Technically, the CESS component in the retail pump price should be discontinued when these prior year subsidy losses are recovered. But to use the CESS in the manner now chosen, so as to guarantee investor’s profits and returns, harms consumers and is a detriment to their welfare.
The unregulated downstream market segment is made up primarily of the heavy fuel oil (HFO) and to a lesser extent aviation fuel, two products used locally in the production of electricity. This segment is currently valued around $300 million at retail prices and represents 52% percent of the domestic throughput volumes. However, these throughput volumes and their associated revenues that accrue to BNTCL will continue their steady decline with the emergence of the green economy, and as BL&P makes more changes to its fuel usage and mix and retires large ageing generation plant.
The purchase of BNTCL puts SOL in a dominant position to capture in its entirety this large unregulated market segment. BNTCL currently owns and controls the pipelines which carry heavy fuel oil (HFO) from Holborn to BL&P generation plant at Spring Garden. This is part of a $140 million infrastructural investment it made by BNTCL in 2005. SOL, on the other hand, through its purchase of ESSO owns the HFO storage tanks. By combining these two entities, potentially gives SOL the complete control of the storage, delivery and ultimately the importation of all HFO entering the island.
The HFO market is characterized by a single supplier (BNOCL) and a single buyer (BL&P). SOL has had exclusive access to this market prior to 2005, through their purchase of Shell. But they lost it to BNOCL as a result of a controversial and contested Cabinet decision taken at the time, a decision that essentially denied them access to pipelines from Holborn to Spring Garden. The court ultimately ruled in SOL’s favour. SOL, naturally, would very much like to recover this market when BNOCL’s current contract with BL&P comes up for renewal in 2018 and this acquisition puts them in an unassailable position to do so. It will come, however, at an increase cost to consumers of electricity in terms of increased fuel charges, since the returns on capital will be higher than that of BNOCL.
BNTCL is an organization that is in steady decline. Apart from falling throughput volumes, revenues and profits, it has a debt overhang of $ 80 million owed to Republic Finance & Trust that will immediately become due as soon as this sale is completed. A financial makeover therefore was necessary to make this deal attractive to any private investor. First, it was deemed necessary to declare BNTCL an essential facility as a matter of public policy for at least the next 15 years. This means that no permission will be given for the duplication of these resources, even if it were feasible to do so. And second, it was necessary to shore up revenues and profits to achieve an acceptable utility rate-of-return. To do this, it was necessary to raise throughput fees across the board by 32 percent before completion of the sales and purchase agreement (SPA). This increase in fees contributes an additional 10 million dollars in profits and allows for a guaranteed risk free return-on- equity of around six percent. It also signals government’s imminent departure from the oil importing business. Notwithstanding assurances given, government can no longer offer value in the new supply chain and, consequently, would be unable to justify importing, storing and reselling oil products.
There are the many assurances being given to make this merger acceptable to the public and to regulators. These assurances are built around the central concept that nothing changes with this merger and that the transfer of ownership from public to private will be seamless. We are also assured that this merger will not harm consumers, change the market structure, or concentrate the market power of any given competitor.
It is now left to the regulators, through the enforcement of fair competition law, to verify these claims and ensure that consumers’ welfare is well protected.
However, to the average observe there can be no doubt that this proposed merger, if successful, will bring about a degree of concentrated market power and dominance that will be a detriment to competition and will reduce the opportunity for others to participate equitably. At face value, this merger is difficult to justify. But, there may be other mitigating factors that the regulators may consider to be in the best interest of the consumers and the economy, the effect of which may very well result in SOL being asked to give up part of the combined
Having previously noted receipt of your correspondence of earlier today in reply to our (BIM) Open Letter to the FTC on several matters, one of grave concern being the redacted documents for the Public perusal at the offices of the FTC as well as lack of pertinent details in the thirteen (13) page “Summary Document”.
We note that this is the eve of the FTC’s stipulated date (March 8th, 2017) to receive public comments or submissions regarding the subject of the proposed sale of the BNTCL to the SOL Group a single potential purchaser of the sole National Petroleum product storage facility in the country.
In our letter we outlined and expressed our concerns that the FTC has not made the following information available to the Barbadian public:
The BNTCL sale to the SOL Group “Summary Document“MUST be a document prepared by the FTC after careful evaluation and perusal of the facts and information provided by the two entities (BNTCL and SOL Group) involved in the proposed sale and NOT that of the vendor the SOL Group having a vested interest in the purchase of the BNTCL!
Proposed “Agreed Sale Price” between the BNTCL and the SOL Group, please provide to the public.
Existing “Throughput Rate” being earned by the BNTCL as a Government owned entity, please provide to the public.
“Agreed Increase Throughput Rate” between the SOL Group and the Government of Barbados after the BNTCL Sale, please provide to the public.
Is the “Agreed Throughput Rate” fixed or floating for the “15 year Protection Period” that the Government has agreed to grant the SOL Group against other competition in the storage of Petroleum products in Barbados?
What mechanism was utilized to arrive at the “Agreed Increase in Throughput Rates” to the SOL Group?
Since the “Protection Period” agreed on behalf of the SOL Group is 15 years, what will be the estimated earnings of the SOL Group in throughput Rates over and above those of the current BNTCL with an estimated annual profit of BD$80 MILLION (Est BD$ 1.2 BILLION over 15 years) in the scenario that the sale had not occurred?
In the absence of the above listed queries and against the backdrop that such information is pertinent to ALLBarbadians weighing in on this matter of National interest and concern in that the BNTCL remains until sold an “Asset” owned by the People of Barbados; and until such time as the FTC makes such information a Public Document, there can be NO closure to this matter!
What is the FTC evaluating and against what information?
What informed decision can the People of Barbados make in the absence of FACTS?
We the People of Barbados herein demand that the information requested above be presented to the public domain through the FTC for our edification and discussion with no less than four (4) Town Hall Meetings being held to discuss the effects of such a sale to a single party thereby creating a “MONOPOLY” and unfair competition in the Barbados Petroleum Market which will redound to increased pricing of the said petroleum products to Barbadians.
In this regard, we demand that the FTC acts with alacrity to address the stated concerns with clarity and equity in the remit of the FTC Act mandating the powers of the FTC to represent the interest of the People of Barbados.
We look forward to your providing the People of Barbados and Electorate with the stated information requested herein within the next seven (7) days of today’s date.
Any divergence from the above will be a miscarriage of justice and at best failure to inform and protect the very populace for which the FTC was mandated and legislated through an ACT of the Parliament of Barbados.
We attach a copy of our Open Letter along with our evaluation of the “Summary Document” for your careful consideration with our many queries and concerns thereto attached!
Another Rally Barbados which was held at the various venues across the island has just concluded.This yearly event continues to prove that there are indeed two Barbados’. Imagine SOL ,CHEFETTE and DIGICEL can sponsor not one, not two, but three cars to be driven by the Mayers brothers, two cars to be driven by Roger Skeete and his son Dane Skeete (who are also sponsored by FLOW) and then there is Rhett Watson and Roger Hill.
Note these are all white Bajans drivers.
BUT these major sponsors cannot see it fit to find any funds to sponsor ONE BLACK Barbadian driver and car. Is it any wonder that a black Bajan driver will find it extremely difficult if not impossible to finish in the top 10 of the rally. BUT maybe this is the plan. Not only that but we have competitors coming in from overseas who are being sponsored by LOCAL companies .Can this be right?
What is also quite ironic is that the overseas winners can be congratulated in FULL PAGE ads by their sponsors in the local media which I am sure cost more than the TOTAL sponsorship money which most of the local drivers get for a whole year. And then Roger Skeete can comment that no one is stepping up to the plate to take over the mantel in local car rallying.
I would like to inform Mr Skeete that if HALF the sponsorship money and suitable cars were available to certain local drivers that this would not be a problem.
On another note the rally marshals (99% of them black),who give of their services year after year, FREE OF COST, and who are said to be indispensable by the Chairman of the rally club, have to stand in the sun and rain doing their job and watch two marshals from overseas (white) get FREE trips and accommodation to watch Rally Barbados but no reciprocal offer is made by the said rally club to the local marshals to witness a rally overseas.
One of these days Bajans will wake up and understand how they are being used and what is really happening in this country.
I was filling up my car with gas at a SOL gas station and one of the attendants told me that after Aug 29, I might not be seeing her. When I asked ‘Why?’, she told me that the manager on contract had resigned and SOL was taking back their station.
I have heard this same story at another SOL station as well. She told me that they wanted to reduce the staff, cut wages of the remaining staff and raise the rent for the store. In these harsh economic times can we afford to be taking food out of peoples’ mouths?
I wonder what SOL has to say about putting people on the breadline and/or reducing their wage. The average gas station attendant earns $50 per day, any less and you might consider them unemployed anyway.
What is the government saying about this? Are they going to allow large companies to indiscriminately put people on the breadline?
The Barbados Integrity Movement (BIM) has issued a highly critical statement about the lack of action by the Barbados Labour Party over its handling of the BNTCL issue.
The promotion and maintenance of fair competition requires that business activities and trading practices be closely monitored and scrutinized to ensure that consumers’ welfare is protected and their interests served through competitive markets. This requirement seems particularly appropriate in the proposed sale of BNTCL to SOL, an agreement that appears difficult to justify.
Dear Ms. Sealy,
Another Rally Barbados which was held at the various venues across the island has just concluded.This yearly event continues to prove that there are indeed two Barbados’. Imagine SOL ,CHEFETTE and DIGICEL can sponsor not one, not two, but three cars to be driven by the Mayers brothers, two cars to be driven by Roger Skeete and his son Dane Skeete (who are also sponsored by FLOW) and then there is Rhett Watson and Roger Hill.
