Majority state-owned ammonia producer Tringen (Trinidad Nitrogen Ltd) reimbursed the company’s minority shareholder, Norway’s Yara, a total of $624.05 million (US$93.13 million) in the last three years for the management and operation of Tringen’s two ammonia plants on the Point Lisas Industrial Estate.
Fifty-one per cent of Tringen is owned by publicly listed National Enterprises Ltd (NEL) and 49 per cent by Yara Caribbean (2002) Ltd, which wholly owns Yara Trinidad, the company that contracted the management and operating agreement with Tringen.
Under that agreement, Tringen reimburses Yara Trinidad for all direct costs and 90 per cent of the total indirect costs incurred in carrying out its obligations, according to information contained in Tringen’s 2022 and 2021 financial statements. The Tringen audits were conducted by Ernst & Young Services Ltd (EY).
Before January 1, 2021, Tringen reimbursed Yara 66.67 per cent of its indirect costs. But effective January 1, 2021, Tringen agreed to amend the terms of the management and operations agreement to increase Yara’s reimbursement for indirect costs to 90 per cent.
A Tringen source explained that Yara’s percentage reimbursement was increased from 66.67 per cent to 90 per cent because of the closure of the ammonia plant that was owned and operated entirely by Yara.
“The costs are now divided between two plants and administration rather than three,” said the source.
Yara’s wholly owned ammonia plant was closed on December 31, 2019 and the reimbursement was increased on January 1, 2021.
“This agreement also allows Yara Trinidad Ltd. to provide the services of its employees as it deems necessary for the management and operations of the company (Tringen),” according to note 1 of the EY audit.
Tringen’s reimbursement of Yara amounted to $258.385 million in 2022, $211.266 million in 2021 and $154.405 million in 2019–a total of $624.056 million.
The original management and operations agreement is dated May 6, 1976. The agreement has been updated since then, with the previous agreement expiring on December 31, 2018.
The current agreement was renewed for a further five-year period beginning on January 1, 2019. The agreement expires on December 31, 2023 and is in the process of being renegotiated by NEL and Yara.
Asked why Yara, the 49 per cent minority shareholder of Tringen, gets reimbursed under the management and operating agreement, president of Yara Trinidad, Treveno Mowassie said: “The reimbursements indicated in the Ernst & Young report are related to the costs incurred by Yara Trinidad Ltd for operating and maintaining the Tringen plants and related infrastructure as well as administrative cost functions necessary for the Tringen business. These are reimbursed at cost.
“The board of directors of Tringen approves a budget for operating expenses as part of the annual business planning process and approves the audited financial statements.”
Asked on Tuesday morning to specify the indirect costs for which Yara is being reimbursed, the Yara president had not responded by Wednesday morning.
Questioned on who audits the expenses incurred by Yara, Mowassie said: “Financial statements are audited annually by independent external auditors both within Trinidad and internationally.”
Yara Trinidad has approximately 180 employees.
By agreement, the Tringen board has six directors: three directors representing the interests of NEL and three representing the interests of Yara. The current chair of Tringen is Ingrid Lashley, who also chairs the NEL board. The Tringen chair does not have a casting vote, which suggests the board can only take decisions if there is consensus.
Tringen’s annus mirabilis
Last year was a record year for Tringen.
The ammonia producer’s gross revenue in 2022 totalled $5.40 billion (US$806 million), a 66.44 per cent increase compared to the $3.24 billion (US$484.47 million) it generated in 2021 in 2022.
The sharp increase in revenue experienced by Tringen in 2022 resulted from the fact that anhydrous ammonia prices company achieved record highs in nominal terms for the year, peaking at over US$1,600 a tonne. The escalation in ammonia prices was primarily due to as a result of the Russian invasion of Ukraine and the value chain disruptions that followed the end of the COVID-19 pandemic.
Tringen’s after-tax profit jumped by 56 per cent to $1.45 billion (US$217.16 million), compared to the $933.46 million (US$139.32 million) the company declared in 2021.
Last year, Tringen paid dividends of $855.96 million (US$127.75 million) to its two shareholder–NEL and Yara. In 2022, NEL received $436.54 million (US$65.15 million), comprising the final dividend for 2021 and the interim dividend for 2022. Yara Caribbean (2000) Ltd received $419.42 million (US$62.6 million).
Tringen paid out 58.80 per cent of its 2022 after-tax profit as a dividend. As at the end of December 2022, the company had $1.93 billion (US$288.35 million) in retained earnings.
NEL received $380.81 million in dividend income for the nine-month period ended June 30, 2023. The investment holding company made three dividend payments totalling $0.50 to its shareholders. With issued share capital of 600,000,641 shares, NEL’s total dividend payments to its shareholders in its 2023 financial year, so far, was $300,000,320.
NEL’s main shareholders are Corporation Sole (Minister of Finance) with 66.05 per cent and the National Gas Company with 16.67 per cent. NGC is 100 per cent owned by Corporation Sole.
According to the Ministry of Energy website, the annual capacity of Tringen I, which was commissioned in 1977, is 500,000 tonnes. Commissioned in 1988, the annual capacity of Tringen II is 495,000 tonnes. The total annual capacity of the two Tringen plants is 995,000 tonnes
In 2022, the total production of both Tringen I and II was 750,781 tonnes, which means the two ammonia plants produced 75.45 per cent of their annual capacity last year, according to data on the Ministry of Energy website.
Tringen I and II exported 727,186 metric tonnes of ammonia in 2022, which is 96.85 per cent of the company’s production in 2022.
“All production from Tringen I and II is sold through sales agency agreements, with a related party, on the open market,” according to the EY audit.
In 2022, Tringen sold ammonia worth $2.75 billion (US$410.44 million) through Yara Switzerland and $2.64 billion (US$394 million) through Yara Ammonia Inc. That means in 2022 a total of $5.40 billion (US$806.26 million) was sold through related parties of Yara Trinidad, on the open market, in accordance with the sales agency agreement.
Asked what percentage of the ammonia produced by Tringen is sold to related parties of Yara, Mowassie said: “Tringen ammonia is sold for the best available market price anywhere in the world, and as a result, the percentage sold to Yara-related parties varies widely. Pricing is based on independent international market publications.”
Tringen’s background
The site in Point Lisas has a rich history that goes back to the establishment of the first petrochemical plant in 1964. From this, a joint venture with Tringen was established in 1977 with the construction of the Tringen I plant and then further expanded in 1988 with the establishment of the Tringen II plant. After acquiring the interests of the previous operator in 1991, Hydro Agri which later was divested into Yara in 2004, has operated the ammonia plants on the Point Lisas site through Yara Trinidad Ltd and has forged a long-standing relationship with Tringen as the manager and operator.
Yara Trinidad Ltd has optimized Tringen’s business performance through access to world-class safety practices and policies specific to the industry, technical resources through worldwide communities of practice, and a global view of business analytics.
In addition, as the largest trader of ammonia globally, Yara has access to markets across the globe thereby bringing both commercial advantages and stable markets for Tringen’s product through the cyclic commercial nature of the business.
This has been demonstrated most recently with both a record year of ammonia prices in 2022 reaching the unheard-of level of US$1,625 per tonne due to the war in Ukraine while now in 2023 navigating through hugely different market conditions, with ammonia prices as low as US$285 per tonne. Source: Treveno Mowassie
