Tuesday February 9th, 2010
- Last update:12 hours 26 min ago
Petrotrin $3.6b over budget on gasolene project
Published: 13 Aug 2009
State-owned Petrotrin on Tuesday closed a US$850 million bond to raise money to finance a gasolene optimisation project which is at least a year behind schedule and more than $3.6 billion over budget, Guardian investigations have revealed. Petrotrin spent $3.34 billion on the project to produce cleaner gasolene in 2007 and 2008 and plans to spend a further $5 billion on the project in 2009 and 2010, according to the confidential preliminary offer document for the US$850 million bond issue. This means that the project which was originally budgeted to cost $4.6 billion (US$750 million) will end up costing $8.34 billion (US$1.3 billion). According to the offer document, Petrotrin incurred expenditure of $1,010 million as of April 2009 on the project and expects to spend a further US$202 million on completing the upgrade, which is 83 per cent complete, by October 2010.
In the document, Petrotrin admits that the project “has incurred significant cost overruns,” but it blames “exceedingly unfavorable pricing of construction contracts, increase in the scope for utilities and offsite services and increase in the scope of the FCCU,” the Fluid Catalytic Cracking Unit. At US$1.3 billion, the gasolene optimisation project, which is meant to improve gasolene quality and volumes, is one part of Petrotrin’s Clean Fuels Programme. The other is the US$392 million ultra-low sulfur diesel (ULSD) plant which will produce higher quality diesel fuel. After the expenditure of close to US$1.7 billion, the full conversion capacity of Petrotrin’s Point-a-Pierre refinery will increase from 150,000 barrels of petroleum per day (bpd) to 168,000 bpd of higher-valued product. The oil company had originally estimated that the US$750 million bond, raised in May 2007 and arranged by Citibank, would have been enough for the gasolene optimisation project. But the cost overruns forced Petrotrin to go back to the international capital markets to raise an additional US$850 million.
The ten-year bond was priced at a discount to yield 9.875 per cent, which was 0.70 per cent above where Petrotrin’s 15-year bond, raised in 2007, was trading on Tuesday. Following what was described as a highly successful road show which took Petrotrin officials to London, New York and Los Angeles, the bond was massively over-subscribed, attracting bids of more than US$5 billion. The demand for the bond meant that each prospective bidder received only 17 per cent of the what they requested. A local broker, who was selling the bond, said that it was “very impressive” that the bond was so heavily over-subscribed. He said it seemed as though the investment bankers to the issue, Credit Suisse and JPMorgan, told Petrotrin that “it would not have flown” if the yield were less attractive. But other analysts told the T&T Guardian that the bond was simply too attractively priced and that Petrotrin was paying much more than they should for the debt.
“Petrotrin got real wood with that transaction,” said a local investment banker. “It was horribly mispriced and it seems that the traders would have made a killing. A good way to judge that Petrotrin paid much more than they should for the bond was the price at which Barbados borrowed money.” Last week, Barbados raised US$120 million by selling US$80 million five-year bonds at 6.75 per cent and US$40 million ten-year bonds at 7.8 per cent. The investment banker said the fact that Barbados was raising less money than Petrotrin meant that the Barbados issue was much more illiquid than the local company’s which should have had an impact on the price.
By Anthony Wilson
...why of course, the
...why of course, the sharpies at the big, recently-bankrupt houses saw these yokels coming a mile off.....after all they have to recoup all the money Madof et al hit them up for......at Petrotrin (formerly Petrosingh)....the candles are costing more than the eventual funeral.....
Any funeral is the people of
Any funeral is the people of Trinidad and Tobago. And it seems like plenty hand mussbe get grease with the grease from the candle from that funeral.
To paraphrase the late Jamaica PM Manley, we money leaving like a dose of epsom salts. And the 'party' now start, re CHOGM, rapid rail, etc.
ajfyzabadbutlertown
Indian yuh could Bray and
Indian yuh could Bray and Bray till yuh blue in yuh face but we STILL ain't ever putting Panday and his family gang in charge!
you and manning can remain
you and manning can remain and battle each other in a couple of years.....
the rest of us will either be elsewhere or safely behind the walls of gated communities and fortresses.....
hopefully by the time the bandits get done with you lot.....things will settle back down...
Go back in the grave
Go back in the grave Mike"THE ANGRY BLACK MAN" Samuel.
Go back in the grave
Go back in the grave Mike"THE ANGRY BLACK MAN" Samuel.
Questionable Management is
Questionable Management is the word …. Why did this Company have to do all of the upgrades at the same time? Millions and millions spent on luncheon for “heads of government wives” Absolutely no need for a new admin building next to the highway simple refurbish and extend the existing building. ….And the list goes on and on.
And what is "unfavourable contracts" is that like " bad choices in seclecting contractors" Well well what a thing.....Someone once asked in Parliment "where de money gone" probable "rat eat it"
Here is the catch … “it’s the employees to blame.. ent ?”
With double evaluation of employees and downgrades instead of upgrades. Treats of VSEP every damn day and zero,zero by zero over the next three years for the employees. Did I mention the word HR dept ? That is a whole story by itself. Yuh thing it easy.
When the price of oil was US$147 everything was spend spend spend now that its cut in half …its de workers to blame…
Two financial years have met each other (end of 08 meets end of 09) and still no audited figures published and monies that could have accrued (very little) interest owed to workers are withheld somewhere…….well at this stage your guess is as good as mine.
The ten-year bond was priced
The ten-year bond was priced at a discount to yield 9.875 per cent, which was 0.70 per cent above where Petrotrin’s 15-year bond, raised in 2007, was trading on Tuesday. Following what was described as a highly successful road show which took Petrotrin officials to London, New York and Los Angeles, the bond was massively over subscribed, attracting bids of more than US$5 billion. The demand for the bond meant that each prospective bidder received only 17 per cent of the what they requested. A local broker, who was selling the bond, said that it was “very impressive” that the bond was so heavily over-subscribed.....Quote.
Sounds like good news to me NOT the gloom and DOOM the "Guardian of the Yuh ain't see partee" likes to portray to the public.
I still waiting for some Indesh writers to explain how they "built" T&T by cutting cane.
What's up with the hate...I
What's up with the hate...I thought the post was about economics/money management..doesnt this kind of news impact ALL Trinidadians. If you are so full of ethnic hatred, look at ex-Yugoslavia, Rwanda to see the results----oh and btw - I am one of those half-half mixed folks so I wasnt brought up to discriminate.
the children of the
the children of the canecutters are well ahead of the rest of this country. maybe that is what they set out to achieve....
next time you cut and paste do not do so selectively copy the entire article so the paragraph comparing this mess to what Barbados did would also be shown......
Mike "THE ANGRY BLACK MAN"
Mike "THE ANGRY BLACK MAN" Samuel The Afros did very well in developing the African continent ent. O'h ah forget dem been oppressed so it is de white man fault again.
The cane cutters have
The cane cutters have progressed to become Doctors, Lawyers, CEO's, COO's, CFO's, Engineers, while the Pan Beaters have progressed to singing Calypso, CEPEP, URP, Druggies and Criminals. Prove me wrong.
Dole Chaddie in that group
Dole Chaddie in that group too?
No Mr Racist Mike Samiul ,
No Mr Racist Mike Samiul , Dole is not in that group, like you he is intelectually departed
this is not about race, that
this is not about race, that is another issue, btw the head of Citibank the bank which has handled this transaction is INDIAN. his parents probably cut cane to put him where he is.
the bond was over subscribed because PETROTRIN is offering a much higher return than what is available on the market right now.
hence investors and bankers jumped at it. the result of that is that they are paying more for capital which would have been available at a lower rate had they done their home work.
ultimately its the brokers and bankers who will make a killing. but PETROTRIN has a history of using Citibank to its disadvantage so it comes as no surprise.
the fact that petrotrin underestimated the scope of the project and is unable to manage it properly is also no surprise.
this is normal for the square pegs in round holes that run the place.
as to why they continue to use the same bank i can see only two reasons......
but fear not the taxpayers will pay, petrotrins customers will pay and last time i checked that was me and you idiots out there talking about indesh and not all doom and gloom
contiue to live with your heads in the sand.....
if a bandit don't cut it off first....
You are wasting your time
You are wasting your time trying to be rational with the "ANGRY BLACK MAN."