Welcoming the settlement, he said a strike would have cost Petrotrin all its exports - amounting to 75 percent of its earnings - and a net loss of $500 million, and with an even worse effect of TT’s wider economy. Rowley said backpay for 2011 to 2014 will be paid when targets are met of improved productivity, more oil production and Petrotrin’s return to productivity, these benchmarks to be negotiated by the end of February.
Describing Petrotrin as “a ward of the Treasury”, he lamented that the firm has a $13.2 billion debt, including $1.2 billion owed to the Government. The company is also burdened by a high debt service charge as a main cause of its weak financial state. Recalling Moody’s downgrade of Petrotrin, Rowley said Standard and Poor’s is considering downgrading Petrotrin pending any drop in its support from the Government from “very high” to “high”.
He said, “This is not solely a Petrotrin problem, it is also a situation which is ever present in all discussions of the national borrowings and debt servicing and the downgrade could easily stretch beyond Petrotrin onto the operations of the Ministry of Finance.” However, reflecting on previous failed wage-talks, Rowley said Petrotrin’s extra wage-bill would have had to have been funded by Petrotrin borrowing as “secured by guarantees at the taxpayer base”, even as such liabilities would worse the National Debt with negative consequences.
“In the absence of Petrotrin’s ability to borrow on its own merit, the wage increases that the OWTU had asked for would have had to be financed either by Government transfers or by government-guaranteed debt,” he said. “Either option would carry serious pitfalls for the entire country.” Apart from Petrotrin, Rowley said the Government is now using its recent US$1 billion bond-issue to initiate its own consolidation plan to cut its fiscal imbalance, itself largely caused slumped energy prices.
He warned, “Providing current transfers to Petrotrin or guaranteeing Petrotrin’s long term debt would certainly jeopardize the country’s sovereign debt rating, which is up for review within the next few months.” Rowley stated the way forward - cost-cutting, consultation and capitalisation - to pay the $81 million extra in annual wage-bill and $300 million backpay.
Firstly, so as not to unduly burden the Treasury the Government has directed Petrotrin to fund the $81 million by taking “firm and immediate steps” to cut its annual operational costs, which targets he vowed to monitor.
Secondly, saying that a few weeks ago he had promised to engage the OWTU over Petrotrin’s future, he said, “We are at that stage now even as it has been precipitated by wage demand issues. In the intervening period, prior to the labour dispute, some preliminary contacts were had and the Government agreed to receive from the Union any and all of its thoughts with respect to the improvement of conditions and performance at the company.
One such response, the first, was submitted to the Government last Friday and will be given the due considerations it deserves.” Rowley said Cabinet’s Energy Sub-Committee is guiding Cabinet and such discussions are on their way to Parliament’s Standing Committee on Energy. This also includes the Gas Master Plan, he added.
Rowley said a Sub-Committee report on Petrotrin is now heading to Cabinet for consideration. “You the taxpayers, you the shareholders cannot continue to turn a blind eye or be uninterested in the challenges at Petrotrin, a company which is so central to our fortunes and which poses such threats as described.
The current situation cannot be left to limp along unattended.” Thirdly, Rowley said these are times of great opportunities, even as he said Petrotrin needs investment capital to boost its onshore and offshore gas and oil production (even as most past monies gone to refinery operations). “Because of financial constraints at both the level of the state and the company, rectifying this imbalance now can only be effected by imports of external and domestic capital as well as new technology into oil and gas production at Petrotrin.” Petrotrin’s survival depends on such, he said.
“In this approach there will be opportunities for local equity investment and employee stock ownership in a future profitably restructured company. “The question is, are we up to the task of grasping these exciting possibilities or will we be stuck in the past of failed confrontations and finger pointing.
Time is not on our side. We must act with decisiveness and clarity if we are to give ourselves the best chance to succeed.” Saying the Government’s duty is to do right for all the people of our nation, he said we must face up to our realities, starting at Petrotrin including possible restructuring.
“Even if we have other ideas, the pressing challenges surrounding this major state enterprise demand immediate action whether it is strengthened management, improved accountability, restructuring of its shape and business model, geared towards increased production, better productivity and sustained profitability.” Appealing for reason and maturity, he said bitter medicine can take TT to a place of good economic health, peace and social justice.
Rowley vowed, “Let me end by reaffirming my commitment that this Government will do all that has to be done to keep our country out of the grip of the lender of last resort, the IMF (International Monetary Fund).” While glad to have averted a major disruption that would have considerably worsened TT’s situation, he said any failure to fix the Petrotrin problem and others leave us vulnerable. He cited British statesman, Winston Churchill’s, statement, “It is the end of the beginning”.
Rowley urged, “Let us make this a time of change, change for the better, with boundless faith in our destiny. Petrotrin is an integral and a major part of our destiny.
Let us resolve to do what has to be done to fix it so that when I address you again in the not too distant future the picture would be brighter and the numbers will be more comforting.”