Nov 2010 Financial News

Motilal warns: Don’t sell this company. MHTL planning AUM2

Nov 18, 2010

The top executive Methanol Holdings (Trinidad) Ltd (MHTL) has warned that T&T must not try to solve what is a short-term crisis by disposing of a major asset that could serve the country well in the long run. It comes from Rampersad Motilal, managing director of Methanol Holdings (Trinidad) Ltd (MHTL), and is a clear reference to proposals that the Government should dispose of the 56.5 per cent stake in MHTL, owned by CL Financial, in an effort to fund the liability resulting from the virtual collapse of Clico. The Government controls CL Financial by virtue of a June 2009 agreement between the two parties. (See: About Methanol Holdings) In an extended interview at his company’s headquarters in Pt Lisas, Motilal told the Business Guardian that MHTL has always “had the privilege of operating with limited interference from its shareholders” and feels that its responsibility as management is always to ensure there is a fair return on investment by the shareholders.

He said that MHTL is very profitable enterprise and the company has been on a consistent growth path since its inception, while, at the same time, always giving shareholders a return on their investment. “So far, we have continued to have the confidence of our shareholders, even in these periods of uncertainty where we have been allowed to continue to execute our business as efficiently as we know how. So we have continued to plan our business, even going forward. Whatever the shareholding structure, our business as management is to run an efficient, strong operation and a robust company.”

The methanol executive said the plan is for the company to continue to build on its core competencies and areas of strength.
“MHTL started as primarily a methanol company and what we have done with methanol is try to establish a critical mass and a dominant position in the global methanol market and we have achieved that. “Of course, the global methanol market continues to grow and we have to be very careful that we don’t slip back in methanol, so we will still want to continue to look for business opportunities in methanol. Having said so, we feel the strength of the company is really in petrochemical or process petrochemicals.”

With the two primary petrochemicals in T&T being methanol and ammonia, MHTL remains active on both points. “Just as we have done in methanol where we achieved a critical mass of production, where we are a dominant player on the world stage, and we can influence that business, so also we plan to achieve a critical mass and a significant position in AUM operations, which are basically in the fertiliser and melamine businesses. So our immediate objectives, in terms of our short-term strategic initiatives, are to try and replicate and expand on our AUM projects so that we can have a significant position in melamine on the global market and in fertilisers.”

It was mere weeks ago that MHTL officially commissioned the AUM 1 facility and already Motilal said they had all but secured the funding for AUM 2, which is projected to cost $12.6 billion and will see MHTL also producing solid fertilisers. Motilal said MHTL has always been able to expand and grow with all equity injections coming from internally generated funds. He said the further growth and diversification of MHTL’s portfolio that includes methanol, UAN and melamine, will lead to even more stable and predictable revenue streams.

“We have a commitment from our bankers already for a significant tranche of funding. In fact, close to US$1.2 billion for another AUM project. Since we are expanding that project, what we have started to do, especially with the Government thrust to get further and further downstream, we have, in fact, taken that project and augmented that project to go even further downstream into the fertilizer, which means adding additional plants and, therefore, increasing the cost of the proposed project.” MHTL has suggested to its financiers the possibility of involving the local banks so they can get a chance to finance part of a major energy sector project and reduce some of the liquidity in the system.

“They are very receptive to allowing the local banks to participate in this funding, so that is very welcome news, in my view, for the local financial sector to be able to project finance and team up with an international institution that itself has its own consortium of banks and be able to participate with that consortium. This will be an excellent opportunity and one of the first opportunities of its type for the local financial sector to finance this kind of project.”
He also said that for the first time, MHTL has access to technology that can take the company and, by extension, the country downstream of methanol, which will open up a whole new horizon, particularly to local manufacturers.

While this is going on, the company continues to look outside of T&T for opportunities. It already has an investment in Oman, which Motilal said took place when local opportunities were not as bright as they are now. “We continue to explore viable opportunities abroad because we feel we have the capacity and appetite to not only develop within T&T, but to develop opportunities in our area of expertise, which is petro-chemical processing wherever we see good prospects.”
While accepting that T&T has advantages like infrastructure and trained staff, Motilal said it was becoming expensive for raw materials. He pointed to Ghana as one of the places MHTL is interested in investing.

About Methanol Holdings

• Methanol Holdings (Trinidad) Ltd (MHTL), operates a methanol complex at the Pt Lisas Industrial Estate, which has five methanol plants and a total  production capacity of more than million metric tonnes annually.

• MHTL is the second largest methanol producer in the world after Methanex.

• Incorporated in 1999, MHTL is the amalgamated entity of its former subsidiary companies: T&T Methanol Company (TTMC), Caribbean Methanol Company Ltd (CMC) and Methanol IV Company Ltd (MIV).

• MHTL also owns the Pt Lisas-based AUM complex, which is a diversified petrochemical complex consisting of seven plants, which manufacture urea ammonium nitrate 32 per cent solution and melamine.

• The AUM complex was built at a cost of US$1.8 billion.

• The company’s management and operations are entirely managed and operated by nationals of T& T.

• The operations of MHTL’s methanol plants have been outsourced to Industrial Plant Services Ltd (IPSL), a local plant operation and management company.

• The CL Financial Group is the majority shareholder of Methanol Holdings (Trinidad) Ltd, with a shareholding of 56.53 per cent.

• Clico, the insurance subsidiary of CL Financial, owns 49 per cent of MHTL in its own right, holding 166,988,249 shares of no par value, according to Clico’s 2007 annual report. Clico’s stake in MHTL was worth $4.4 billion in November 2009, according to the Credit Suisse/Milliman report.

• The other shareholders of MHTL are consolidated in a locally registered company called Consolidated Energy Ltd (CEL), which has a shareholding of 43.47 per cent.
• CEL’s shareholders comprise three German companies: Ferrostaal AG, Oil Products AG (OPAG) and Helm AG.
• Seventy per cent of the shares in Ferrostaal are owned by the International Petroleum Investment Company (IPIC), a company controlled by the government of Abu Dhabi.
• CEL also has investments in local ammonia companies, Caribbean Nitrogen Company Ltd (CNC) and Nitrogen 2000 Unlimited (N2000).
• The Government took control of CL Financial in June 2009 when its former chairman, Lawrence Duprey, signed an agreement giving the State four directors on a seven-member board.


Source:
Trinidad Guardian
Thursday November 18, 2010

http://guardian.co.tt/business/business-guardian/2010/11/18/motilal-warns-don-t-sell-company