An­tho­ny Wil­son

CLI­CO, the in­sur­ance com­pa­ny that was bailed out by the Gov­ern­ment 14 years ago, yes­ter­day dis­closed it had placed a val­ue of US$377 mil­lion (TT$2.258 bil­lion) on its 56.53 per cent share­hold­ing in Methanol Hold­ings In­ter­na­tion­al Ltd (MHIL).

The MHIL val­u­a­tion was pub­lished in CLI­CO’s fi­nan­cials for the year end­ed De­cem­ber 31, 2022, an abridged ver­sion of which was pub­lished in yes­ter­day’s news­pa­pers.

The 2022 val­u­a­tion of the Oman-based methanol com­pa­ny is TT$324.98 mil­lion less than the TT$2.583 bil­lion val­u­a­tion placed on MHIL in the in­sur­ance com­pa­ny’s 2021 ac­counts.

The in­sur­er’s abridged con­sol­i­dat­ed ac­counts re­veal that MHIL gen­er­at­ed US$379.51 mil­lion (TT$2.542 bil­lion) in gross sales of methanol and made US$200 mil­lion (TT$1.340 bil­lion) in gross prof­it.

At a me­dia con­fer­ence on De­cem­ber 6, 2022, ex­ec­u­tive chair of CLI­CO, Claire Gomez-Miller, said the com­pa­ny was in the process of sell­ing 36.63 per cent of the shares in MHIL.

That sale would take CLI­CO’s share­hold­ing in MHIL to just un­der 20 per cent, as pre­scribed by the new In­sur­ance Act.

The pro­ceeds from the sale of part of CLI­CO’s share­hold­ing in MHIL will be used “to clear the re­main­ing debt” of the in­sur­ance com­pa­ny to Gov­ern­ment, Gomez-Miller had said.

At the me­dia con­fer­ence, she dis­closed that CLI­CO had re­paid TT$17.29 bil­lion to Gov­ern­ment, leav­ing a bal­ance of just over $1 bil­lion still to be re­paid by the in­sur­ance com­pa­ny.

CLI­CO’s shares in MHIL are be­ing sold to the Switzer­land-based petro­chem­i­cal com­pa­ny Pro­man, which was part of the con­sor­tium that in­cor­po­rat­ed the Mid­dle East­ern methanol pro­duc­er in St Kitts in 2004. The share­hold­ers’ agree­ment that es­tab­lished MHIL gave Pro­man the right of first re­fusal of CLI­CO’s shares in MHIL, if the in­sur­ance com­pa­ny de­cid­ed to sell its stake.

If Pro­man agrees with CLI­CO’s val­u­a­tion, the Eu­ro­pean com­pa­ny is ex­pect­ed to pay the in­sur­ance com­pa­ny US$244 mil­lion (TT$1.634 bil­lion).

In Note 4.3 of its sep­a­rate fi­nan­cial state­ments, CLI­CO sug­gest­ed it had un­der­tak­en the val­u­a­tion of MHIL, rather than procur­ing the ser­vices of an in­de­pen­dent, third-par­ty val­u­a­tion com­pa­ny that spe­cialis­es in petro­chem­i­cal com­pa­nies.

CLI­CO said: “In 2022, the com­pa­ny de­ter­mined the fair val­ue of its share­hold­ing in MHIL us­ing a com­bi­na­tion of both the in­come and the mar­ket ap­proach. Both ap­proach­es were pre­pared us­ing in­puts spe­cif­ic to each to es­tab­lish “low”, “mid”, and “high” Im­plied En­ter­prise Val­ues for each ap­proach.”

It said the av­er­age En­ter­prise Val­ues (EV) for the two val­u­a­tion ap­proach­es were then ap­plied to MHIL’s to­tal debt, work­ing cap­i­tal ad­just­ments, tax­a­tion, any mi­nor­i­ty in­ter­est and the dis­count for lack of mar­ketabil­i­ty.

“This re­sults in the eq­ui­ty val­ue which can then be as­signed be­tween the share­hold­ers ac­cord­ing to their share­hold­ing. This re­sult­ing mid-val­ue, us­ing this val­u­a­tion method, was used as the rea­son­able val­ue for CLI­CO’s share­hold­ing in MHIL of US$337 mil­lion,” ac­cord­ing to the CLI­CO fi­nan­cials.